Employer-Provided Assistance timing issue between paying and reimbursed / taxable income in w-2

[seanwsmithtaxes88]

Help  please! Trying to confirm if I should amend last year's taxes. I didn't enter 1098-t because I got tuition reimbursement by employer. However, I have now realized that the amount above $5,250 was getting reported as income on my W-2, so I should enter 1098-t because I will get a credit for the amount of total tuition paid less $5,250, right?

To make it more complicated, I am trying to do it right this year, but because of the delay between paying in tuition and getting reimbursed (I get reimbursed once class is over, sometimes in new tax year), I am getting reimbursed by more than I paid. I was reimbursed $9k in 2022, but my 1098-t only shows $6k. I got $5,250 tax free, and the remaining ~$4k is getting reported as w-2 income. So I am getting a very small education credit due to 1098-t saying I paid $6k but having to enter that employer gave me the $5,250 tax free in the section that asks "Enter the amount Sean received. Don't include amounts already listed on a W-2 or other tax form.".

I am thinking what will fix it is if I amend 2021 to add the 1098-t, I can show that I paid $9k in 2021, was reimbursed only $6k, of which $5,250 was tax-free but the rest was on my w-2 wages. So essentially for 2021, I would get a tax credit for the fact that I paid a lot more than I was reimbursed for (in that year).

Is this correct? Thanks in advance!

[KrisD15]

Right.

Ok, so in 2021, you paid 9,000 Tuition and received 5.250 Tax Free Employer assistance. 

Are you saying that 750 was included as income on your 2021 W-2? If so, who paid the other 3,000?

In 2022, the school shows 6,000 paid, and you again received 5,250 Tax Free Employer assistance. So why is 4,000 being added to your income? 

You can pay in one year for that year and the first three months of the following year, but you cannot go backward. 

I suggest you claim the 3,750 (plus any additional fees for books and supplies) on an amended 2021 return, then claim the 750 (plus books and supplies) paid on the 2022 return. 

I can see that your employer may have paid the school in 2021, then included that as wages on your 2022 W-2.

This makes a murky situation, but the payment was "Technically" paid in 2021, so I advise you amend that year for the credit. 

When someone other than the student makes a payment, it is as if the student made the payment (with exception for tax-free assistance) 

Pub 970 

[seanwsmithtaxes88]

Thank you so much! Let me please note a few things to answer your questions and make sure the below applies in light of answers to your questions:

Employer didn't directly pay school. Employer paid me. The first $5,250 didn't show up on taxes, but the remainder showed up in my W-2 as income.

The 4,000 is added to my income because I got 9k in tuition reimbursement, 5250 is tax free, the amount above that has to be counted as w-2 income.

Basically, Employer paid all of the tuition through reimbursing me. But because I exceeded the $5,250 tax free, anything above is income on W-2. So I am thinking I can enter the full amount I paid to the school, enter the amount the employer reimbursed tax free $5,250, and I would still get a credit off the amount exceeding $5,250 because while I did get reimbursed, that reimbursement counted as income for me. It would be the same thing if I paid the tuition from my salary - I earn money, I pay tuition with it, and I receive Lifetime Learning Credit from it. However, in this case I receive income in the form of tuition reimbursement that gets counted as income on my w-2 (the part above the tax free 5250), I pay tuition with it, I get credit.

Yes, the issue is mainly that employer is reimbursing me for 2021 classes in 2022.

Hope this clarifies and means the below is correct in light of answers to my questions.

Thanks again!!

[KrisD15]

Still not completely clear, 

for 2021 the school reported that you paid 9,000. 

Is that correct?

In 2022 the school reports you paid 6,000. 

Is that correct? 

If yes and yes, then follow the original answer and amend 2021. 

If the payments do not match your 1098-T, you might need to adjust it.