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Old 04-11-2013, 01:27 AM
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What to do with tuition reimbursed more than the tuition expense in 2012?

I paid $8,000 in tuition expenses (for my MBA) in 2012 but my employer reimbursed $15,000. The extra money was for tuition paid in 2011 which I had already itemized as a job-related expense in my 2011 tax return.

So, my question is whether the extra $7,000 reimbursed in 2012 will be taxed as ordinary income? If yes, where will I add it in form 1040? Note that the $15,000 tuition reimbursement amount does not show up in my W2 and was not taxed by the employer at source.

Or, do I have to amend my 2011 tax return?

Please note that I am familiar with Hope credit and Lifelong Learning credit which do not apply here.
Appreciate a response!



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Old 04-11-2013, 02:55 AM
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“So, my question is whether the extra $7,000 reimbursed in 2012 will be taxed as ordinary income?”=================> If this is paid through an employer-provided educational assistance program you can exclude up to $5,250 of those benefits each year. To qualify as an educational assistance program, the program must be a formally written plan for the benefit of a company's employees.This means your employer should not include the benefits with your wages, tips or other compensation shown in box 1 of your Form W-2. If that is the case you cannot use any of the tax-free education expenses paid for by the employer as the basis for any other deduction or credit, including the AOC and the lifetime learning credit regardless of when you received the benefit.

If the benefit paid is more than $5,250 then the amount that is generally taxable then the amount that exceeds $5,250 would be included in Box 1 of the W-2. This is true unless it is considered a working condition benefit. If it does qualify as a working condition benefit then it would not be taxable even if the amount paid was more than $5,250. Certain job-related education may qualify. To qualify the education must meet the same requirements that would apply in determining whether you ,the employee, could deduct the expenses had you paid the expenses. In order to meet the test the education must meet at least one of the following:1. The education is required by the employer or by law for the employee to keep his or her present salry, status, or job. The required education must serve a bona fide business purpose of the employer.2. Th education maintains or improves skills needed in the job.
“ If yes, where will I add it in form 1040? Note that the $15,000 tuition reimbursement amount does not show up in my W2 and was not taxed by the employer at source. “============>As mentioned above, If it does qualify as a working condition benefit then it would not be taxable even if the amount paid was more than $5,250.

“Or, do I have to amend my 2011 tax return?”=========>As long you deducted it on your 2011 return, then you need to file amended return.



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Old 04-19-2013, 09:10 PM
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Thanks for your response! I had also searched for other discussions on this forums and based on that I think most of what you posted is a boiler plate advice while I was looking for something more specific. Now, I believe that you are right in that the 2011 tax return should be amended instead of showing the tuition reimbursement as an income. My tax consultant echoed the same thoughts! More work for me including interest and penalty but that is the right way to do it.

Quote:
Originally Posted by Wnhough View Post
“So, my question is whether the extra $7,000 reimbursed in 2012 will be taxed as ordinary income?”=================> If this is paid through an employer-provided educational assistance program you can exclude up to $5,250 of those benefits each year. To qualify as an educational assistance program, the program must be a formally written plan for the benefit of a company's employees.This means your employer should not include the benefits with your wages, tips or other compensation shown in box 1 of your Form W-2. If that is the case you cannot use any of the tax-free education expenses paid for by the employer as the basis for any other deduction or credit, including the AOC and the lifetime learning credit regardless of when you received the benefit.

If the benefit paid is more than $5,250 then the amount that is generally taxable then the amount that exceeds $5,250 would be included in Box 1 of the W-2. This is true unless it is considered a working condition benefit. If it does qualify as a working condition benefit then it would not be taxable even if the amount paid was more than $5,250. Certain job-related education may qualify. To qualify the education must meet the same requirements that would apply in determining whether you ,the employee, could deduct the expenses had you paid the expenses. In order to meet the test the education must meet at least one of the following:1. The education is required by the employer or by law for the employee to keep his or her present salry, status, or job. The required education must serve a bona fide business purpose of the employer.2. Th education maintains or improves skills needed in the job.
“ If yes, where will I add it in form 1040? Note that the $15,000 tuition reimbursement amount does not show up in my W2 and was not taxed by the employer at source. “============>As mentioned above, If it does qualify as a working condition benefit then it would not be taxable even if the amount paid was more than $5,250.

“Or, do I have to amend my 2011 tax return?”=========>As long you deducted it on your 2011 return, then you need to file amended return.



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