Educational Assistance

[Sxs3652]

I work in New York. The policy book states that if "I leave voluntarily I will be required to repay the tuition amount received during the 12 months prior to my separation. Failure to repay the benefits will lead to the outstanding balance being reclassified as taxable income." What does the last part mean exactly? It seems to me that I can not pay back the tuition and all I will have to do is pay the taxes on it. Am I right? Thank you.What is the name of your state (only U.S. law)?

 

[swalsh411]

It means they will add it to your W-2 however I am not sure this is allowed. If it wasn't taxable when you received it then it's not taxable now. The employer doesn't decide what is taxable; the IRS does and publication 970 makes no mention of an employer being allowed to switch it as a punishment for leaving.

The employer can certainly sue you if they wish to recover what you owe.

 

[LeeHarveyBlotto]

The employer can certainly sue you if they wish to recover what you owe.

They can try, but I'd bet more than even money that the policy manual also states that nothing in it constitutes a contract.

 

[dmcc10880]

Directly from Pub. 970

Benefits over $5,250. If your employer pays more than $5,250 for educational benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income.

Working condition fringe benefit. 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 deduct as an employee business expense. For more information on working condition fringe benefits, see Working Condition Benefits in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits.

It's commonplace for companies that pay for employees' education expenses that they rely on the employee to remain employed at the company for a certain amount of time. As an employee to benefit from the employer's contribution to the education and leave prior to the agreed period should be held financially accountable.

 

[swalsh411]

I don't agree. The IRS publication on the matter doesn't say that any given payment can be converted to taxable if the employee leaves the employer. The primary qualification is that it be job related.

The employer is certainly within their right to set up their policy so that the employee pays back something if they leave within a certain amount of time. I know of know justification for deciding retroactively that any given class or training is no longer work related as a punishment for the employee terminating.

 

[davew128]

Swalsh411 is right. The employer's recourse is contractual and through the courts if necessary for repayment but it is NOT taxable income to the employee as wages.