Taxes on EMBA Sponsorship

[askzs247]

My company pays for my EMBA tuition directly to the business school, but doesn’t deduct taxes or include it in my W2. My university sent me a letter capturing the tuition payments for the year. Will I need to declare the tuition payments that my company made as part of my filing and pay appropriate taxes, based on the university letter? Can it be claimed as a deduction?

[IsabellaG]

It depends on how much they paid.

• If your employer paid $5250 or less for educational assistance benefits  under an educational assistance program, you can exclude up to $5,250 of those benefits each year. This means your employer should not include the benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2. And you would not enter the 1098-T, because you aren't claiming any tax benefit.
• But 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. And you would enter the 1098-T, and because you'd be able to claim a tax benefit for the assistance that you paid tax on.

[upsman786]

@IsabellaG A follow on question here.  If the employer provides the tuition as an advance and declares it as a business expense, does this still need to be reported on my taxes?

[Critter-3]

If it is a taxable event it will be listed on your W-2 so there is nothing more you need to do. 

[upsman786]

@Critter-3 can you elaborate on that? what would constitute a taxable event? If it shows up on the W-2 then it would count towards my taxes for the year, correct? 

My main questions:

• What are the conditions under which a sponsorship doesn't have a tax impact if the amount of the sponsorship is over $5250? 
• If this sponsorship requires a 100% payback to the employer if I leave before the contract term, then I would've paid taxes on the sponsored amount and I would need to pay back the gross amount to the employer. Is my understanding correct? Do I have any option to recoup the taxes paid in such a scenario?

[Critter-3]

If it shows up on the W-2 then it would count towards my taxes for the year, correct?  Correct

My main questions:

• What are the conditions under which a sponsorship doesn't have a tax impact if the amount of the sponsorship is over $5250?   As posted already ... anything over $5250 in one tax year is added to your wages if the employer does it correctly.

• If this sponsorship requires a 100% payback to the employer if I leave before the contract term, then I would've paid taxes on the sponsored amount and I would need to pay back the gross amount to the employer. Is my understanding correct? Do I have any option to recoup the taxes paid in such a scenario?  Until the amount is forfeited you have paid no taxes on the amount that was free thru the employer plan however if you do have to pay it back you can amend your prior year return to take advantage of the education credits. 

[#7]

If it shows up on the W-2 then it would count towards my taxes for the year, correct?  Correct

My main questions:

• What are the conditions under which a sponsorship doesn't have a tax impact if the amount of the sponsorship is over $5250?   As posted already ... anything over $5250 in one tax year is added to your wages if the employer does it correctly.

• If this sponsorship requires a 100% payback to the employer if I leave before the contract term, then I would've paid taxes on the sponsored amount and I would need to pay back the gross amount to the employer. Is my understanding correct? Do I have any option to recoup the taxes paid in such a scenario?  Until the amount is forfeited you have paid no taxes on the amount that was free thru the employer plan however if you do have to pay it back you can amend your prior year return to take advantage of the education credits. 

[upsman786]

@Critter-3 thank you for your response. Sorry, but I don't understand what you mean by "Until the amount is forfeited you have paid no taxes on the amount that was free thru the employer plan..." And in regards to the second half of your statement, I'm assuming the limit for the amendment is only up to the $5250, correct? Or would I be able to recoup all the taxes paid, if I have paid the employer back the full >$5250 amount awarded.

Can the working-condition fringe benefit not be used to treat the amount over $5250 as a business expense and therefore not taxable? 

[Critter-3]

This is not the simplest concept to explain in a forum such as this  and you don't seem to be understanding the concept and in fact are going deeper into the rabbit hole ...please  seek local professional assistance and/or your employer for clarification on this matter.