Payroll Obligations on Compensation Expressly for Tuition

[MTommy]

What is the name of your state? MN

In terms of federal tax obligations on employee compensation, does anyone know and/or have a place to direct me to that will clarify the following situation. I would ultimately need paper copies so I can officially document the rules, further guidance would be greatly appreciated. Here’s the situation…

I work for a small company and have proposed that my MBA school tuition expenses be paid directly by (or reimbursed by) the company. I work for an LLP and some discussion has been given to that increasing the tax liability of the company.

(1) Are the substantial or significant differences in tax law for me or the company because I work for an LLP?

(2) Will the company be obligated to pay FICA/Medicare on tuition the same as if it were a standard wage?

(3) Will I be obligated to pay FICA/Medicare on tuition the same as if it were a standard wage?

(4) Will the company be obligated to pay unemployment and other taxes on tuition the same as if it were a standard wage?

(5) Will I have to claim reimbursement as wages on W-2 earnings?

(6) Does employer have to call tuition wages and pay safeharbor/401K matching?

I thank anyone who has information on these questions in advance. The company has no policy in place so I’m trying to figure out the most ‘tax efficient’ and legal way to cover these work related expenses so that I can minimize student loans.What is the name of your state?

 

[tranquility]

Up to $5,250 of payments received by an employee for tuition, fees, books, supplies, etc., under an employer's educational assistance program may be excluded from gross income. This can be found in Code sec. 127 and in the regulations at 1.127-1.

However, in order for an employer to maintain such an "educational assistance plan", he must maintain records and file a return for the plan. The return is on Form 5500, Annual Return/Report of Employee Benefit Plan and will have a Schedule F. (Code sec. 6039D)

 

[MTommy]

Thank you very much for your help. I have a quick follow-up question. What is the difference (is there a difference) between school tuition and work seminars/training programs? Does a $500 2-day seminar on economic issues count against the $5,250?

Warm Regards-

 

[pattytx]

Work seminars/training are considered "working condition fringe" benefits and, as such, are nontaxable in any amount.