NMC to issue tax credit forms for students next year

It appears the students of the Northern Marianas College have never been issued their 1098-Ts—tuition statements that may have allowed them to avail of a potential thousands of dollars in tax credits, tuition refunds, fee and tuition deductions, and other benefits for the educational costs they’ve paid out during a tax year.

While the college is set on issuing the forms early next year, it remains unclear as to why they have not done so in years past. The 1098-Ts allow students to avail of either the American Opportunity Credit, the Lifetime Learning Credit or the tuition and fees deduction on his or her tax return.

Chief financial officer Tracy Guerrero said in an interview last week that to her knowledge the college has never issued out these forms.

Leo Pangelinan, dean of Student Services, indicated the same when he assured the college would have the forms out next year.

Guerrero has been at the college for nearly two years but it appears the non-issuing of forms stretch back beyond that. On Friday, she said they have aimed to have the forms issued by February next year for taxes reported in 2014.

Yesterday, she told the Board of Regents that they are “getting the system configured” to print out these forms. But a question was also posed whether a student has the right to claim benefits for the year 2013, if the student insisted on it.

Guerrero indicated that this would be something that needs to be looked into, as filing for the year 2013 has closed. Board chair Frank Rabauliman declined to comment when asked why the college has not been issuing the forms in years past. He deferred to the college as he said it was an administrative matter.

A letter from their auditor, J. Scott Magliari & Company, in June this year recommended that the college should obtain tax opinion on whether or not the college was required to issue the 1098-T.

The letter was sent to the college’s senior management and Board of Regents. It quoted the following IRS Regulations: “You must file Form 1098-T if you are an eligible education institution. An eligible education institution that is a government unit, or agency or instrumentality of a governmental unit, is subject to the reporting requirements of Form 1098-T.”

The auditor said IRS further defines an “eligible education institution” as a college, university, vocational school, or postsecondary school that is described in section 481 of the Higher Education Act of 1965 as in effect on August 1997.

The auditor also said that an institution is defined so if it is eligible to participate in the Department of Education’s student aid programs. Over 90 percent of NMC students are awarded USDOE’S Federal Student Aid, according to Pangelinan yesterday.

The auditor also said the eligible includes “most accredited public, nonprofit, and private postsecondary institutions.”

For interested students, IRS links a USDOE accreditation engine on their website. They explained that if a college was found using this accreditation search engine, then that college is eligible and “you can claim the American opportunity tax credit.”

NMC appeared on the engine, as having received institutional accreditation on Jan. 1, 1985, by the Western Association of Schools and Colleges, Accrediting Commission for Community and Junior Colleges.

Noncompliant

A certified public accountant on island believes that NMC is indeed an eligible educational institution and the non-issuing of these forms warrant a noncompliant issue.

Speaking on the condition of anonymity, he said he learned of the matter through his clients who were either students or parents of students who are enrolled at the college.

There are three kinds of benefits you can get from tuition payments you are paying to an eligible educational institution, he said.

One is tuition and fee deduction, which is deducted against the gross income of a taxpayer; the second one is a Life Time Learning credit, the maximum amount of which is $2,000 in tax credit; and the last one is the American Opportunity credit, which can give a tax credit of $1,500 and a $1,000 refundable, he said.

The American opportunity tax credit can be claimed in tax-years 2009 through 2017 for expenses paid for tuition, certain fees and course materials for higher education.

More benefits and criteria can be gathered by students or parents on the IRS website.

“NMC is not issuing a 1098-T,” he said. “There are some instances where they are issuing tuition statement or statement of account, [and] some of them are using it as a basis of those credits I mentioned, but they are not actually issuing the form 1098-T.”

Pangelinan confirmed that in the past NMC has received inquiries into the tax form, and the college has issued out financial statements in response.

But to his knowledge NMC has never received a complaint about the financial statement not working with CNMI Revenue and Taxation.

The accountant claimed that the “problem” is that Revenue and Taxation is honoring some of those statements. Saipan Tribune called but could not verify this as of press time.

Tax could also not verify whether these forms have been received by NMC, or comment further as queries bordered on confidential information and required a special request in written form.

“It’s like a W2,” the accountant said. “The W2 is provided to the employee by the company, one of the companies is provided to CNMI Rev’ and Tax. So it shows that if Rev and Tax has a copy of the W2—and the taxpayer claims his salary and wages and withholding facts—they will always reconcile because Rev and Tax has a copy.”

“But in case of the 1098s, CNMI Rev’ and Tax has no idea, because a copy has not been issued.”

He said a tax preparer is “blind” because the tax form indicates whether a student is eligible. For example, the form will show if the student is a graduate student and therefore not eligible for the tax credits, he said.

But this same student may avail of a tuition and fees deduction, according to him.

He also said a student must be a halftime student.

“How will I know if the student is halftime student? If the student provides a statement of account, as tax preparer there is no way you can determine that the tax you are preparing is qualified for those credits because you don’t know…the school will determine that,” he said.

“The parent can tell you, but what is your basis? The school is the only one that can determine that.”

He believes parents and students are losing out on a lot of money in recouping tuition expenses because of the “many, many years” the forms have not been issued.

“It’s a compliance issue. If NMC is an eligible educational institution then they are required to issue it. It’s like a W2 that you are required to issue to employees. If you don’t issue it, then you are not complying,” he said.

He said it is not the obligation of CNMI Rev and Tax to inform NMC to issue a 1098-T. He said it is the responsibility of NMC to determine whether they are an eligible education institution.

“If they are, they should issue it,” he said. “Does Rev’ and Tax need to inform me to issue a W2? No. The employee immediately knows to issue the form because it’s a compliance issue. The same applies to NMC.”