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yoonh
Returning Member

Tuition remission taxes

Hi!


I'm currently in grad school using my employer's tuition remission program.

My grad program is reled to my job (improve my job skills). so my coworkers who are in same job position and grad program are exempted to pay taxes even if exceeds $5250.

 

I realized that when I submitted the application for the tuition remission program, I answered the one question wrong, which made my tuition considered as taxable income by my employer.

(answered "yes" to it could qualify me for a new trade or business - which is not!! I'm a nurse and doing nursing master's program. misunderstood the question..)

 

I contacted HR and they said once the application is processed, they cannot fix it. I've been paying lots of taxes for and I shouldn't be. Is there anyway to get this taxes refunded when I file the tax return next year? I saw some posts saying I have to contact my employer and get the corrected W-2 form but at this point I feel like they won't do that. I tried to fix this before this year but They just kept saying I've been already paying for this. 

 

I did free online tax consult and they told me that I have to file amended tax return. I know I answred it wrong but there should be a way to fix this and kinda unfair for me to pay all the taxes (almost 10k this year). if i appeal to IRS it shouldn't be taxed... is this possible?

3 Replies
Hal_Al
Level 15

Tuition remission taxes

Q.  Is there anyway to get this taxes refunded when I file the tax return next year? 

A. No and yes. Job related education is not deductible by a W-2 employee.  So you cannot take a deduction or reclassify this money as tax free on your tax return.  Even when (before 2018) job expenses (including education) were deductible, they were only an itemized deduction subject to a 2% of AGI threshold.  

However, since you are effectively  paying the tuition with "your own" after tax money, you are eligible for the Lifetime Learning Credit (LLC). The LLC is 20% of tuition paid, so there's a chance you'll get most of it back. 

 

As others have said, the only way to correct this is for your employer to treat the money as tax free, on the W-2.  This is essentially between you and you're employer, not you and the IRS.  You said "I contacted HR and they said once the application is processed, they cannot fix it".  If you can't convince them to change the tax treatment of the payments, going forward, you're simple out of luck . 

 

The tax law is basically that job related education is not deductible by a W-2 employee.  But, job related education provided by the employer is deductible by the employer (and tax free to the employee).  They just have to do the paper work correctly. 

 

Opus 17
Level 15

Tuition remission taxes

However, if you are paying tax on the tuition money, you are eligible to claim any applicable tax credit—in this case, the Lifetime Learning Credit.  That might soften the blow.  

You might also raise the issue with your union (if you are covered) or your state labor board.  They might be able to motivate the employer to correct the issue.  

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Hal_Al
Level 15

Tuition remission taxes

@Opus 17 makes a very good point.  Job related education is not a  deductible expense and there is no way to reclassify this money as tax free on your tax return. But, tuition paid, with your money,  to an eligible institution, is eligible for a tuition credit, regardless of the tuition being related to your profession.  Since you are now effectively  paying the post secondary tuition with "your own" after tax money, you are eligible for the Lifetime Learning Credit (LLC). The LLC is 20% of tuition paid, up to $10K.  So there's a chance you'll get most of it back.  Grad students are not eligible for the more generous American Opportunity Credit (AOC or AOTC).

 

I have revised my answer above to reflect this. 

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