Deduct Repayment of Tuition Reimbursement

[erikthered8]

What is the name of your state (only U.S. law)? Indiana

Hi all,

My company provided tuition reimbursement in 2012, and about 25k out of 30k was included in my 2012 W2 as income. According to IRS publication 970, $5250 can be excluded, so that adds up.

What I am unsure about is that the company is claiming that my 30k repayment (repaid in 2013) cannot be adjusted for last year or this year. This sounds very fishy to me... like they want a double tax benefit (education write-off last year and higher compensation cost this year) by sitting on their asses and leaving me with the short end of the stick. I've read through IRS publication 970 and nowhere does it mention repayment of an employer provided tuition reimbursement plan. Thoughts? I appreciate any ideas you guys may have.

 

[erikthered8]

Refreshing

 

[LdiJ]

What is the name of your state (only U.S. law)? Indiana

Hi all,

My company provided tuition reimbursement in 2012, and about 25k out of 30k was included in my 2012 W2 as income. According to IRS publication 970, $5250 can be excluded, so that adds up.

What I am unsure about is that the company is claiming that my 30k repayment (repaid in 2013) cannot be adjusted for last year or this year. This sounds very fishy to me... like they want a double tax benefit (education write-off last year and higher compensation cost this year) by sitting on their asses and leaving me with the short end of the stick. I've read through IRS publication 970 and nowhere does it mention repayment of an employer provided tuition reimbursement plan. Thoughts? I appreciate any ideas you guys may have.

Can you be clearer about what you mean by the bolded?

 

[erikthered8]

Can you be clearer about what you mean by the bolded?

I asked them for documentation that I indeed paid them back $30k and that they adjust either my 2012 W2 for an amended filing (this was before Apr 15 ... they took their sweet time in answering and had me play hot potato with different departments) or the 2013 W2 they will send me at the end of the year. In short, they are not adjusting either income #.

 

[LdiJ]

I asked them for documentation that I indeed paid them back $30k and that they adjust either my 2012 W2 for an amended filing (this was before Apr 15 ... they took their sweet time in answering and had me play hot potato with different departments) or the 2013 W2 they will send me at the end of the year. In short, they are not adjusting either income #.

Ok, let me make sure that I understand.

They provided you 30k in tuition assistance and included 25k on that on your 2012 W2. Therefore you were taxed on that money. You later repaid them the entire 30k, and now they will not reduce your gross wages to reflect that you repaid them the 30k? Do I understand you correctly?

 

[erikthered8]

Ok, let me make sure that I understand.

They provided you 30k in tuition assistance and included 25k on that on your 2012 W2. Therefore you were taxed on that money. You later repaid them the entire 30k, and now they will not reduce your gross wages to reflect that you repaid them the 30k? Do I understand you correctly?

Exactly. The 4.5k ish that I paid in taxes is chump change in the context of the economy, but it is alot for someone who just paid out 30k :-\

 

[LdiJ]

Exactly. The 4.5k ish that I paid in taxes is chump change in the context of the economy, but it is alot for someone who just paid out 30k :-\

Ok, if you truly repaid them the 30k on top of the 25k being included in your wages, then they have an obligation to reduce either your 2012 wages or your 2013 wages by 25k (not 30k because 5k of it was not included in your wages in the first place).

However, did you also realize that since the money was included in your wages that you were entitled to take either a tuition and fees deduction or an education credit? Did you do so? If not you should amend your 2012 return to do so.

 

[erikthered8]

Ok, if you truly repaid them the 30k on top of the 25k being included in your wages, then they have an obligation to reduce either your 2012 wages or your 2013 wages by 25k (not 30k because 5k of it was not included in your wages in the first place).

However, did you also realize that since the money was included in your wages that you were entitled to take either a tuition and fees deduction or an education credit? Did you do so? If not you should amend your 2012 return to do so.

Yes, the wage reduction would be by 25k. Is there anything written in the tax code that I can show them? They gave a very odd answer of tuition reimbursement being classified as a cash basis adjustment (as opposed to accrual basis). Ironically for them, some of the classes that I took were in taxes and accounting, and their justification makes no sense whatsoever. I think I need the law to be put in front of them before they will get a move on. I believe I did take a tuition deduction but I will double check.

Thank you for all your input. Again, any statutes on adjusting income regarding tuition reimbursement repayment will be greatly appreciated!

 

[LdiJ]

Yes, the wage reduction would be by 25k. Is there anything written in the tax code that I can show them? They gave a very odd answer of tuition reimbursement being classified as a cash basis adjustment (as opposed to accrual basis). Ironically for them, some of the classes that I took were in taxes and accounting, and their justification makes no sense whatsoever. I think I need the law to be put in front of them before they will get a move on. I believe I did take a tuition deduction but I will double check.

Thank you for all your input. Again, any statutes on adjusting income regarding tuition reimbursement repayment will be greatly appreciated!

I don't think that there is a specific statute that addresses this. At least I do not recall one. Its basic accounting. You repaid them wages and therefore they have an obligation to make the corrections on their end. It has nothing to do with being cash basis or accrual basis. You would be more likely to find some good information in an accounting textbook than in a statute.

However, if they absolutely refuse to do so, you can deduct the 25k on Schedule A. That is not as good as them making the correction, but its better than potentially losing your job over the issue.

 

[erikthered8]

I don't think that there is a specific statute that addresses this. At least I do not recall one. Its basic accounting. You repaid them wages and therefore they have an obligation to make the corrections on their end. It has nothing to do with being cash basis or accrual basis. You would be more likely to find some good information in an accounting textbook than in a statute.

However, if they absolutely refuse to do so, you can deduct the 25k on Schedule A. That is not as good as them making the correction, but its better than potentially losing your job over the issue.

Oh I already left that job (which is why I had to repay).

I told them that they have an obligation to get the accounting correct, but they are sticking with their cash basis explanation.

 

[davew128]

I don't think that there is a specific statute that addresses this.

You mean besides the Claim of Right Doctrine and IRC 1341?

 

[LdiJ]

You mean besides the Claim of Right Doctrine and IRC 1341?

Hey...if there is a code and you know it...fabulous. I am sure the OP is greatful.

 

[Mnemosyne]

You mean besides the Claim of Right Doctrine and IRC 1341?

Nicely done.

 

[erikthered8]

Nicely done.

You guys are awesome. Period.

Ok, so they finally agreed to change my 2012 W2 to reflect the correct wage amount. Now, once I file an amended tax return, I should receive a refund from the overpayment of all taxes (federal income, SS/payroll, etc.) correct? For some reason, my friend thinks I'm still getting screwed by not being refunded for the SS, FICA, unemployment, payroll taxes that were levied on the extra income.

 

[LdiJ]

You guys are awesome. Period.

Ok, so they finally agreed to change my 2012 W2 to reflect the correct wage amount. Now, once I file an amended tax return, I should receive a refund from the overpayment of all taxes (federal income, SS/payroll, etc.) correct? For some reason, my friend thinks I'm still getting screwed by not being refunded for the SS, FICA, unemployment, payroll taxes that were levied on the extra income.

Unemployment and payroll taxes were never deducted from your wages in the first place, because those are employer taxes. So there is nothing for you to get back there.