Hello colleagues,
We are seeking insight into how other institutions operationalize the taxation of nonresident alien (NRA) students on scholarships when a portion is applied to unqualified education expenses, even when no excess scholarship taxable income is reported on Form 1098‑T (i.e., Box 5 does not exceed Box 1).
In our scenario, although total scholarships do not exceed qualified tuition and related expenses for 1098‑T reporting purposes, a portion of the award is designated for and applied to unqualified expenses (e.g., room, board, insurance). As a result, that portion is taxable and subject to NRA withholding.
We would appreciate your perspective on the following:
- How do you operationally identify and track the portion of scholarships applied to unqualified expenses for NRA students when there is no excess reported on the 1098‑T?
- How do your student information, financial aid, or tax systems support this distinction between qualified vs. unqualified expense application?
- How you handle withholding when no cash is available (e.g., billing the student, gross-up, or use another methodology)?
- Have you encountered audit or compliance challenges in this area, and if so, how have you addressed them?
Thank you in advance for your input.
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Sonia Singh
Managing Director
The George Washington University
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