Federal Pell Grants are awarded based on financial need and, unlike loans, do not have to be repaid. Pell Grants are considered by the IRS to be one kind of Title IV need-based educational grant. For the purposes of taxes, they are treated like scholarships and are therefore tax-free. Students do not receive W-2 forms for Pell Grants.
What Is A W-2 And When Is It Issued?
Employers who pay wages in exchange for services must issue a W-2 to each employee. The W-2, "Wage and Tax Statement," is mandatory when the employer deducts taxes or would deduct taxes if the employee had not claimed an exemption. A Federal Pell Grant, in addition to being a tax-free scholarship, according to the IRS, is not a type of employment income and therefore no W-2 is issued.
Catherine Lovering has written about business, tax, careers and pets since 2006. Lovering holds a B.A. (political science), LL.B. (law) and LL.L. (civil law).