The IRS is checking on students and alumni whose scholarship grants in 1990 exceeded tuition by $2,000 or more.
The Internal Revenue Service on Monday informed MIT it will issue a summons today for the records of 1,558 MIT students in that scholarship category.
Of the group, 1,226 are graduate students and 332 are undergraduates. The information from the records may be used by the IRS to audit the tax returns of such students.
Students who receive letters sent Friday by Frank E. Perkins, Dean of the Graduate School, and Frederick I. Crowley, Assistant to the Comptroller, should contact the IRS or the US District Court in Boston if they wish to contest the IRS action before MIT releases the records, as required, on March 27, ten days after the summons. The IRS is issuing the summons five days later than they had previously expected, thereby giving MIT and its students five more days to respond.
MIT is required to release such information if requested through a court order. Normally, the Federal Education Rights and Privacy Act protects the privacy of educational records. The scholarships involved are from all sources-MIT, government and community organizations. The IRS requested the name, Social Security number, amount of scholarship, and the amount of tuition billed by MIT to each individual.
For tax purposes, scholarship payments should be included in the recipient's income to the extent that they exceed tuition, books, equipment, and fees and supplies required for enrollment or courses of instruction. Scholarships covering room and board and transportation costs are considered taxable income under the 1986 tax legislation, MIT officials said.
The student has the responsibility for reporting such income. The IRS concern stems from the fact that there is no corroboration of such income from universities, which are not required to report to the IRS their scholarship payments to students.
Stanley Hudson, director of student financial aid, noted that the financial aid of the undergraduates is principally based on need, except for some outside scholarships, such as the Reserve Officer Training Corps grants. He said that on the undergraduate level, the IRS subpoena and the 1986 law affects undergraduate who are from the most impoverished families and who are working to support their families.
MIT has learned that the IRS requested similar information from at least two other area universities in order to determine whether students who received taxable scholarships reported that income on their federal income tax returns. These requests focused primarily on graduate student scholarships for US citizens.
Students who receive MIT scholarships are notified through the Graduate School Manual that the scholarship may represent taxable income. Instructions for reporting such income are presented by the Office of the Dean of the Graduate School in an annual tax workshop, and are summarized in a Tax Guide which is available from the dean's office.
Dean Perkins and Mr. Crowley invited students to call them if they had questions on the matter.
A version of this article appeared in the March 17, 1993 issue of MIT Tech Talk (Volume 37, Number 26).
