Employer Paid Tuition in 2019. Left the company and got my last few paychecks taken away. How should I include this in 2020 tax?

[bunnyteeth]

My employer paid $8,866.91 for tuition in 2019. I left the company in early 2020, before meeting 1-year stay requirement. They took my last 2 paychecks away. Below is the breakdown. How should I include this in my 2020 tax return? 

#1 check

- Income is $1,455.77. Company deducted $180.39 for taxes. Company took back $961.80. The rest of check went to insurance, etc. 

#2 check

- Income is $2,785.61. Company deducted $559.10 for taxes. Company took back $2,226.51.

How should I include this in my tax return? 

[MarilynG1]

Basically, this means that you can now claim an Education Credit for tuition that you have now paid yourself (since you repaid your employer).

You can Amend your 2019 return to claim your education expenses.  Click this link for info on How to Amend a Prior Year Federal Return.

Your employer probably added any Tuition Reimbursement over $5250 to your W-2 wages in 2019 (as allowed by law) so you can claim expenses up to $3189 (the amount you repaid) in your amended return.

[bunnyteeth]

When asking about this issue last year, I was told that I can claim credit or deduction for 2020 year (IRS publication 525 pages 34 and 35 under Repayments). Is that still applicable? Which one is more advantageous? Amend 2019 tax or claim credit/deduction on 2020 tax? If possible, I'd prefer to do it on 2020 tax as IRS is taking forever on processing amended tax returns (they haven't processed my amended 2018 tax that sent it early last year). 

[MaryM428]

The only way to be sure that you are getting the maximum amount is to do the 2019 amendment and also enter the claim on 2020.  Then if the amendment is a better option you will file the amendment instead of claiming the amount on 2020.  If these is not any appreciable difference, then it will be faster to use the 2020 return to claim the deduction.  If you decide not to use the amendment, you can just cancel it in TurboTax.  Don't complete the amendment until you are sure that you will want to file it.  You will need to use a computer to amend 2019 with TurboTax.  

Sign on to TurboTax on a computer, go to Tax home, and then reports and documents at bottom of screen.  Select 2019 and follow the directions to amend.  If you use the amendment, you will need to print and mail it.  The cover page of the printout will have an address and a list of items to send with the amendment.  Be sure to date and sign the amendment.

[bunnyteeth]

Thank you for the suggestion. Now I need help on doing the actual work:

1. For amending 2019 taxes, what should I change? in which section can I enter the new $3189 as expense? 

2. For 2020 repayment over $3000 method, how do I enter the information? 

A novice at this so please give me as much as details as possible. Thank you so much!!

[bunnyteeth]

Can I please get an update on my questions? Thank you! 

[AmyC · Accepted solution]

1. If you amend for the education credit, follow the prompts. See Where do I enter Form 1098-T? You can't amend 2019 for the repayment of income.

2. Page 35  About Publication 525, Taxable and Nontaxable Income gives two methods but only one is available this year. Since you repaid more than $3,000, you can use the method where you claim a credit. These are the steps:

1. Figure your 2020 tax as normal, without deducting the repaid amount.
2. Locate prior year taxes that are now incorrect. Note the amount of tax liability.
3. Refigure your tax from the earlier year(s) subtracting the income that you have repaid.
4. Subtract the difference in tax liability for each year.
5. Add all the differences together for your 2020 credit allowed.
6. Please see example and full details in my other post.

[bunnyteeth]

Hello again,

Regarding the explanation for #1 (1. If you amend for the education credit, follow the prompts. See Where do I enter Form 1098-T? You can't amend 2019 for the repayment of income.), I'm still a bit confused where to enter $3189. I looked at the area to enter 1098T and the "tuition and enrollment fees" box is already pre-filled with last year's amount and grayed out. I'm not able to enter anything. I'm not sure if I should make changes to 1098T form, as turbo tax's advise is to fill it out as it is shown on the form even if it is wrong. Please help guiding me to the exact place where I can enter $3189. Thank you.