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:
