How to tell if Employer Provided Tuition Assistance is included in W-2.

[Hal_Al]

There is a separate place to enter employer assistance not included in box 5 of the 1098-T. 

After entering the 1098-T, you will encounter a screen "Did (student name) receive any of the following tax free benefits last year?"  The fine print says "Tell us if the scholarship in box 5 of the 1098-T includes any of the following. Answer No.

Later you reach a screen "Did (student name) receive a scholarship or grant in 2022?"  Answer Yes. One of the boxes is for Employer Provided Assistance. Enter the $1309 there.  

For others reading this, enter only tax free employer assistance.  Do not not enter amounts included in box 1 of your W-2.  The law allows employer to provide up to $5250 tax free. Anything more is taxable income. 

[marisabel22]

Thank you so much! This was very assuring.

[USER 4926821]

@Hal_Al — been reading a few of your answers.

I received $5250 from my employer (university) this year. However, I received a total of $12000 in total payments received (box 1). The amount over $5250 is on my W2 in box 1. My employer makes me pay them at a rate of 32.65% back to them in a lump sum for the amount over $5250. Am I being taxed twice? To me it seems like I am paying twice. My question is: Can I deduct the amount above $5250 to claim the LLC? 

[Hal_Al]

Q. My question is: Can I deduct the amount above $5250 to claim the LLC? 

A. Yes, since the tuition was essentially paid with your after tax money.

Q. My employer makes me pay them at a rate of 32.65% back to them in a lump sum for the amount over $5250. 

That doesn't make any sense.  One payment of 32.65% or several payments until it's all paid back?  You sure it's not  just 7.65% (the FICA tax your employer paid of the benefit). Or did they also include a "tax allowance" in box 1 of the W-2 that they are asking you to pay back, 25% being the IRS mandated withholding on lump sums (25 + 7.65 = 32.65).  You should ask for an explanation. 

[USER 4926821]

@Hal_Al — 

Here is what I received:

They pay  the tuition taxes up front and allow us to reimburse them back over a longer period.  It is paid for and added to income, on the W2, as a lump sum and is taxed at a lump sum rate of 32.65% for all employees. They pays the taxes when they are due (the semester the courses are taken) and then we pay them back.

I am paying the taxes on the total amount above $5250 to my employer.

[Hal_Al]

That makes sense, but it  is still unusual.  You are "paying tax on the tax" but you're not being double taxed. You are effectively getting that money to pay your tax on the benefit.  What your employer pays, to the IRS,  should (I think) be included as withholding in boxes 2, 4 & 6 of your W-2. 

[USER 4926821]

@Hal_Al —

It is very confusing. So when I report my 1098T, I cannot say that the amount over $5250 was “not scholarship or aid”?

I want to claim the LLC if I can. The confusing part is if that money is eligible or not?

[Hal_Al]

Q.  So when I report my 1098T, I cannot say that the amount over $5250 was “not scholarship or aid”?

A. No. Just the opposite. You can say that the amount over $5250 was “not scholarship or aid”. 

Q. I want to claim the LLC if I can. The confusing part is if that money is eligible or not?

A. Yes, you can claim the LLC.  The money (over $5250) is eligible.  That part is not confusing to me. You can claim that money.

The rest of what your employer is doing is a little confusing to me, but it does no affect your tax filing for the LLC.  So, $12,000 - 5250 = 6750.  You LLC should be 6750 x 20% = $1350

[USER 4926821]

@Hal_Al —

Thank you for your help. Is it deductible because it appears on my W2 in box 1? 

They also said this in response:

The was paid for at 100% by the university and none of the tuition expense were out-of-pocket.  Therefore, you would not want to utilize the form (1098T) to claim it as a deduction.

“You will most likely receive a larger tax return when you file your Federal taxes since most employees are not in a 32.65% tax rate.  The 32.65% is for Federal, Medicare, & Social Security taxes that are paid based on that additional income and what the university paid, and you refunded, is also added to your W2 in the appropriate boxes to ensure it is not paid for twice.  They are not required to pay the state taxes the semester in which the courses are taken so that will often increase the State taxes an employee owes when they file.”

[Hal_Al]

Q. Is it deductible because it appears on my W2 in box 1? 

A. Yes. That's exactly why it's eligible for the tuition credit ("deductible")

I can see your confusion, when they say "The was paid for at 100% by the university and none of the tuition expense were out-of-pocket.  Therefore, you would not want to utilize the form (1098T) to claim it as a deduction".  I'm of the opinion, that is wrong. It (the amount above $5250) was paid with your taxable money and is eligible, even if not literally "out of pocket".

Similarly, students (or their parents) on scholarship may be allowed to claim the tuition credit. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit".  PUB 970 even has examples of how to do that “loop hole”.

[williamhosford7216]

My hospital paid me $5000.00 for nursing tuition I paid last year. Is that taxable for the year 2023. They did not take out taxes

[Hal_Al · Accepted solution]

Q. My hospital paid me $5000.00 for nursing tuition I paid last year. Is that taxable for the year 2023?

A. Simple answer: No.  There is nothing you need to report on your taxes.

But, it may depend on the details.  Employers are allowed to reimburse employees for tuition, tax free, up to $5250, assuming the employer has a qualified tuition reimbursement plan. A hospital is a big enough entity, that their plan is probably qualified. They are allowed to reimburse you in 2023, for tuition paid, by you, in 2022 and the payment is  still  tax free.  Since, they did not take out taxes, that's another indication that it's tax free.  But, you may want to verify that with them.  

Your next question might be: can I claim the tuition credit on my 2022 tax return.  The answer is no, because you were reimbursed with tax free money.  This is true, even if the reimbursement occurred in the following year. 

[USER 4926821]

@Hal_Al 

Thank you very much for your help!

Is there any specific way I report it? I added my W2 as is, and when I get to education credits, I include the total amount from my 1098T as payments received for qualified tuition and related expenses (box 1) but say $5250 in box 5 which indicates scholarships or grants even though it says on my 1098T the full amount including $5250. When I do this it gives me a $1300 LLC, vs. if I don’t do it, I don’t get the LLC.

[HopeS]

When claiming the education credit you must enter the information as reported on Form 1098T. This Form is reported to the IRS and will be matched to your return so not reporting it would be incorrect.

If you have scholarship money left over after covering your qualified education expenses, you'll need to include that amount as part of your gross taxable income. That means scholarship money counts as income when calculating your tax liability when used to pay for: Room or board. Utilities. Your Form 1098T Box 5 shows the amount of scholarships and grants that were paid directly to the school for the student's expenses. Scholarships and grants may reduce the amount of qualified expenses the student can use when calculating a credit.

Taxable Scholarship 

Guide to Form 1098

@USER 4926821 

[USER 4926821]

@HopeS 

How am I able to claim LLC then? The amount over $5250 has been reported in box 1 of my W2 as income. I am confused by your response with @Hal_Al‘s responses prior?