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Old 12-02-2010, 03:09 PM
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Tuition Remission

I'm working at a university as a Financial Analyst (I manage budgets and grants) and I'm getting a part-time MBA at the school. The MBA program is job related, improves the skills I need for my current job and won't qualify me for a new business. I'm planning to stay in the finance industry after graduation.

The university is providing tuition remission for these classes, but I'm being charged income tax on the value. I shouldn't be charged this tax because of the above reasons. When I get my W2, it's going to be higher as well because of the tuition remission.

How should I correctly report my income on the 1040? I can have a different value on the income line vs what's on the W2 and include a memo that explains this difference, or is there a better way of doing this?



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Old 12-02-2010, 08:40 PM
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" I shouldn't be charged this tax because of the above reasons. "---> Agreed. As IRC sec #127 states, QUOTE," if the graduate level tuition remission is for an employee (not a teaching or research assistant) and the employee is enrolled in a degree-granting program, up to $5,250 in tuition remission is excluded from the employee's gross income. Such tuition remission should not be reported as income on the employee's W-2, and no payroll taxes should be withheld on such amounts."

"When I get my W2, it's going to be higher as well because of the tuition remission. How should I correctly report my income on the 1040? I can have a different value on the income line vs what's on the W2 and include a memo that explains this difference, or is there a better way of doing this? "---->There are several possible options that you can choose; You can be subject to your tax refund if the amounts of income tax (including the tax on the tuition remission) withheld from your paychecks that you have paid to the state or federal government throughout the past year exceed your Federal tax liabilities on 1040. Or After the W2 is issued and reported to the SSA, you may request your employer to use W2C to make any and all changes to the original W2 already issued, and you need to receive a copy of the corrected W-2, W2C. You will want it corrected so you can file the tax return without questions from the IRS. So, you should file the incorrect W-2 and the W-2C before filing your tax return. Form W-2C only states the corrected information and may not have all the information required to file your tax return. The original W-2 can be used for additional information that may be needed.



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Old 12-03-2010, 12:18 AM
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Thanks for the fast response.

The University is correctly accounting for the first $5,250 for tuition remission. It's the amount above this that I feel I shouldn't be taxed on as well because of the job relatedness. What's the best way to deal with this?

Additionally, if I can't get a corrected W2 from my employer, do I have any recourse?

Thanks



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Old 12-03-2010, 01:10 AM
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The University is correctly accounting for the first $5,250 for tuition remission. It's the amount above this that I feel I shouldn't be taxed on as well because of the job relatedness. What's the best way to deal with this?---> The Internal Revenue Code requires that educational assistance in excess of the $5,250 exclusion MUST be added to employees’ taxable wages and employment taxes must be Withheld; as you know, if the amount received by you exceeds the annual excludable amount ,$5,250, the excess must be added to your taxable wages when you receive the benefit. The increase in taxable wages also increases the taxes withheld and reduces net pay.The additional taxable income above $5,250 and taxes withheld are reported on your W-2 form.

Additionally, if I can't get a corrected W2 from my employer, do I have any recourse?---->Then as said above, you do not need a W2C.



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Old 12-03-2010, 12:10 PM
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Wnhough, thanks for your quick responses.

I was looking over Publication 970, and it states the following:
Quote:
However, if the benefits over $5,250 also qualify as a working condition fringe benefit, your employer does not have to include them in your wages. A working condition fringe benefit is a benefit which, had you paid for it, you could dedcuit as an employee business expense.
So, my stance is that the amount over $5,250 is a working condition fringe benefit as defined in publication 15-B. In that it had the rules that I mentioned above with the program being job related and not qualifying me for a new trade. As a result, this educational assistance can be excluded from my wages.

Any suggestions based on this interpretation?



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Old 12-03-2010, 05:49 PM
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" So, my stance is that the amount over $5,250 is a working condition fringe benefit as defined in publication 15-B. In that it had the rules that I mentioned above with the program being job related and not qualifying me for a new trade. As a result, this educational assistance can be excluded from my wages."---->Basically, I agree with your opinion( though I am not quite sure if you qualify it as defined in Pub. 15-B);However, the IRS’ position is that the value of JOB-related graduate tuition reductions and/or waivers by colleges and universities do not QUALIFY as working condition fringe benefits, so you may not exclude the value of the graduate tuition reduction or waiver in excess of the $5,250 limit from your gross income.because the tax treatment of this item is addressed elsewhere in the
tax code [e.g. § 117(d) or § 127. I guess you need to contact your employer and you may let them know " What the Pub. #970 stattes"
Please isit the IRS Web sit for further info; United States Code: Title 26,117. Qualified scholarships | LII / Legal Information Institute

Take note on the provision; QUOTE," c) Limitation
(1) In general
Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction."



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Old 01-04-2011, 04:16 AM
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Re: Tuition Remission

The following requirements will determine graduate student eligibility for full tuition remission based on TA, PA, RA, and non-resident tuition remissions for certain Instructional Academic Staff (see Eligible Instructional Academic Staff Titles sections for a list of titles) and University Fellows who are enrolled as graduate students. Students with these appointments are responsible for paying their segregated fees as billed by the tuition due date - regardless of when the Bursar's Office is notified of the eligible appointment.
==========================
Earl Nunes



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