(U-WIRE) EVANSTON, Ill. - The tax man is knocking on student's door.
Starting in January, universities will have to report information about students to the Internal Revenue Service to determine the students' eligibility for federal tax credits. In order to do so, university officials said they will have to gather information they don't normally gather.
And students may end up footing the bill.
"It's a problem our institutions will have to deal with," said David Merkowitz, director of public affairs for the American Council on Education. "Yes, there will be a burden, there will be cost involved. It's not the IRS's job to determine the cost of pay for it. Ultimately it will be passed along to students."
Tuition could go up to pay for the cost of reporting to the IRS, but most students will not feel it, Merkowitz said. The tax credits will give students a break on tuition, and those not eligible because of their high incomes will not feel the strain, he said.
But NU officials said the process of collecting the information would be costly and burdensome.
"This is why the costs go up," said Assoc. Provost Rebecca Dixon. "We have to pay to handle all this stuff."
The IRS is requiring colleges to report students to obtain information to determine who can receive Hope Scholarships and Lifetime Learning Credits, Merkowitz said.
Hope Scholarships provide a maximum $1,500 tax credit for the first two years of college. For part-time students, graduate students or students beyond their first two years, Lifetime Learning Credits will provide 20 percent of the first $5,000 of tuition through 2002 and on the first $10,000 after 2002.
Only individuals with incomes under $50,000, or married couples with joint filings under $100,000, may claim tax credits.
Universities will have to start gathering information in December in order to meet the Jan. 1 deadline for the Hope credits, Merkowitz said. That means students who pay their tuition bills before Jan. 1 will not receive Hope credits, he said. Lifetime Learning credits take effect after June 30, 1998.
Because NU is on the quarter system, not being eligible because of payment deadlines will not be too much of a problem, Dixon said. Students will be able to claim Spring Quarter tuition, she said.
"I can't tell how many will be affected," she said. "It will affect some but it won't affect most of our students. Because we are on the quarter system, they still will be able to claim credit."
The IRS has not yet told universities exactly what information it will require, but the IRS has said it will need taxpayer identification numbers, which NU does not collect, Dixon said.
"They haven't regulated, they've only legislated," she said.
NU also does not know who claims the students as dependents or who is paying the tuition, which will complicate the process, Dixon said. And the IRS wants information on all students, regardless of eligibility, which will draw out the process further, she said.
"Without the information from colleges, they'll have no idea if (students) are eligible for the amount they claim," Merkowitz said. "Otherwise the potential for fraud is enormous."
The IRS has said it wants to make the process as smooth as possible, but it will take time and money for universities to collect the information needed, Merkowitz said. Because the reports are due fairly soon, the IRS will issue temporary regulations to universities and add to them later, he said.