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Old 01-25-2011, 06:19 PM
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Employer paid tuition....

My employer paid my tuition for all of last year for my master's degree. After the $5250 allowed by the federal government taxfree, PUB 970, I had to pay taxes on the remaining $3138.87. What my employer did was make me pay the $3138.87 over several pay periods. I was only supposed to be taxed on that amount and it was to be added to my total salary. Basically, I have no idea how to claim this on my taxes or if it is even legal the way my employer did this. Any help would be appreciated.

Koifish



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Old 01-26-2011, 11:57 PM
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“What my employer did was make me pay the $3138.87 over several pay periods. I was only supposed to be taxed on that amount and it was to be added to my total salary. Basically, I have no idea how to claim this on my taxes or if it is even legal the way my employer did this. Any help would be appreciated.”----> You are correct; as you said , since the tuition reimbursement is paying you for a cost you incur for your employer, technically it is not considered a profit or income to you. As a result, the money you received from your employer to replace your funds for costs is not reportable to federal or state income tax authorities. That said, the entire payment needs to be a reimbursement only. Any amount that is paid above your original school costs would be income and then reportable on your income taxes. Further, the amount of tuition reimbursement that is not taxable is capped. As you can see, Congress limited the tuition reimbursement exclusion to no more than $5,250 annually per person which is specified in Section 127 of the U.S. Internal Revenue Code.I guess you need to let your employer know this.



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Old 01-08-2013, 02:17 AM
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Tax Liability on Tuition Sponsorship by Employer

I started a Executive Masters program in '12 for which my company is sponsoring me in full. Under this arrangement, the university sends the tuition bill directly to the company, eliminating the need for me to seek reimbursement. My tuition costs in '12 was about $11K and my empployer has informed me that this amount will not be reported as a supplement to my base salary. However, in '13 I'm being told that I will have to pay additional taxes on the remaining tuition amount of approximately $60K as it will be added to my compensation. Since this graduate degree is directly related to my line of work and will help me improve my skills in the same line of work, I believe the tuition will be tax deductible. Considering this, do I have any options with my employer to NOT include the remaining tuition as part of my income?



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Old 01-08-2013, 04:19 AM
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“However, in '13 I'm being told that I will have to pay additional taxes on the remaining tuition amount of approximately $60K as it will be added to my compensation. Since this graduate degree is directly related to my line of work and will help me improve my skills in the same line of work, I believe the tuition will be tax deductible.”------->Basically, as you can see, the I.R.S.’s rules for deducting work-related tuition are complicated and onerous. under I.R.S. rules, employees can deduct ordinary and necessary expenses they pay in connection with their trade or business that are appropriate or helpful to the business. Taxpayers can deduct education costs, in particular, as “ordinary and necessary” expenses if the education maintains or improves the skills required for the taxpayer’s current trade or business. If not, the expenses are considered personal. It turns out the rules for M.B.A.’s depend on whether you can prove that you were already established in a certain trade or business before going to get an M.B.A. and that the degree will help you maintain or improve your skills in that specific trade or business. If you can demonstrate both, you can deduct whatever tuition costs your ER didn’t reimburse or offer to reimburse. The decisive factor in this case’d be whether you were already established in your trade or business,” which you proved you were.Basically, if you can connect the dots between the courses you are taking and your existing skill set or your job, you can deduct it. That’s the basic gist. While the case can’t be used as precedent to prove other taxpayers’ cases, tax preparers said it did give them insight into how the I.R.S. was thinking about the issue. And to actually get the deduction, if you aren’t one of the lucky ones who just sneaks past the I.R.S., you’ll need to be prepared to prove you qualify by being able to demonstrate your employment history and how the M.B.A. — down to the courses you take — will enhance your skills in your existing business. You’ll also need necessary documentation, like canceled checks and tuition bills. So you need to have all your ducks in order. You need to have your facts. ;ypu need to have your backup documentation. You need to have all the information the court would require in order to make a judgment.”



“ Considering this, do I have any options with my employer to NOT include the remaining tuition as part of my income?”-------->as mentioned above



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Old 01-08-2013, 01:19 PM
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Master of Science, NOt MBA

Hello. Per our previous post, my graduate degree is a Exec Master of Science and NOT an MBA. So, I'm pretty sure the costs are tax deductible. And since my company was able to not report the first tuition payment of $11K, I'm thinking there may be an option for me to request that the remaining cost of $60K also not be reported and am seeking some basis for making the request. Any advice would be appreciated. Thanks.



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Old 01-08-2013, 09:52 PM
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Company-provided sponsorship is usually tax-free, which benefits theEE.Companies may choose to provide educational assistance under Section 132(d), Working Condition Fringe Benefits, because no written plan is required and there is no dollar limit on expenses, or because it fits their employees' education needs. Under Section 132(d) ERs can offer a tax-free working condition fringe benefit for any expense EEs can deduct on their own tax returns under IRC section 162. it can also include education that maintains or improves job skills or meets requirements for the EE to remain in his or her current position.
Excludable education expense as a Working Condition Benefit must be related to the EE's current job and must help maintain or improve the knowledge of skill required for the job.
However, even if the education meets one or both of the above tests, it is not qualifying education if it:

•Is needed to meet the minimum educational requirements of the EE's present trade or business, or
•Is part of a program of study that will qualify the EE for a new trade or business.
ERs CAN OFFER a tax-free working condition fringe benefit for any expense EEscan deduct on their own tax returns under IRC section 162. This typically includes education that maintains or improves job skills or meets requirements for the EE to remain in his or her current position.






The IRS Pub 970, Tax Benefits for Education, provides examples and tests to help determine whether the education qualifies as a working condition benefit. I guess you can contact your ER/HR dept for mor einfo in detail
Publication]Publication]Publication 970 (2011), Tax Benefits for Education 970 (2011), Tax Benefits for Education 970 (2011), Tax Benefits for Education


Last edited by Wnhough : 01-08-2013 at 10:32 PM.


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