How does non-taxable tuition reimbursement get reported to the IRS for two different employers?

[byehicelllo]

Let’s say you work for two different employers during the year. Employer 1 pays you $5250 in tuition reimbursement. You leave that job halfway through the year and start a new job with employer 2. Employer 1 does not claw back the reimbursement. Employer 2 then pays you $5250 in tuition reimbursement for the next semester. I would assume neither of these employers would report the amount in box 1 of your W-2 since they don’t know what the other employer paid. At the end of the year how does the IRS know you received more than $5250? How do you declare one of the reimbursements as income and pay the tax?

[Hal_Al]

Q.I would assume neither of these employers would report the amount in box 1 of your W-2 since they don’t know what the other employer paid.

A. That's probably right. You'll have to verify it by comparing W-2 to your pay stubs.

Q. At the end of the year how does the IRS know you received more than $5250?

A. They don't. Unless your employer notes it on your W-2. Look at boxes 14 and 12.  Even then, it's not something the IRS computers math up.

Q.How do you declare one of the reimbursements as income and pay the tax?

A. You enter it as other income, on line 8 of Schedule 1.  You are correct, it should be reported (see below) . 

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in  Home & Business)

 - Wages & Income

Scroll down to:

-Less Common Income

      -Misc Income, 1099-A, 1099-C

       - On the next screen, choose – Other reportable income  

       - On the next screen, click yes

       - On the next screen, you'll get blanks to enter the amount and a description.

Under IRC Section 127, an employer can deduct up to $5,250 per calendar year for each employee that qualifies for and elects to utilize the employer’s qualified educational assistance plan.

Per the IRS’ Fringe Benefits Guide, Section 127 defines a qualified educational assistance plan as meeting the following criteria:

• If the employee has multiple employers, the benefit cannot exceed $5,250 per calendar year for all employers combined.      Reference: https://www.connectyourcare.com/blog/tuition-reimbursement-benefits-employers/

[eschoolar]

So does the $5250 non taxable need to be reported as employer assistance on the scholarship section of the education exp reimb page? Thanks for any help.

[KrisD15]

IT DEPENDS

If your employer paid but also included it in your wages, (therefore taxed) then NO.

If your employer paid the school directly or reimbursed you with tax-free funds and did not include it in your wages, (therefore not taxed) YES, enter it as additional tax-free assistance not reported on the 1098-T in the Education Section. 

@eschoolar

[Hal_Al]

Do not add the $5250 to box 5 of the 1098-T.  Later  you'll be asked about other scholarships and assistance.  You'll be given a specific box for employer assistance/reimbursement. Enter there, but only the tax free portion ($5250 in your case).

Note: if your employer paid the school directly, some (but not most) schools may have already included that amount in box 5 of the 1098-T. If so, don't duplicate the entry at employer assistance..

[salmaelbarrad]

So if I have multiple employers and I'm thus eligible for over $5,250 of tuition reimbursement, can I still collect the amount exceeding $5250, and that amount would just be taxed? 

[Hal_Al]

Q. So, if I have multiple employers and I'm thus eligible for over $5,250 of tuition reimbursement, can I still collect the amount exceeding $5250, and that amount would just be taxed?

A. Yes.  "If the employee has multiple employers, the benefit cannot exceed $5,250 per calendar year for all employers combined."  Reference: https://www.connectyourcare.com/blog/tuition-reimbursement-benefits-employers/

See above for how to enter the excess, as taxable income.  It is "other income" and goes on line 8z of Schedule 1, not scholarship (line 8r).