Employer tuition reimbursement

[kar62]

Hello. I've been receiving tuition reimbursement for the past few years. In previous years when I would complete a course in december, I would submit for reimbursement in december and receive funds in January. That january money would still count for previous year IRS reimbursement totals. I would not be taxed the following year for excess reimbursement.

This year it didn't got that way. The reimbusement from 12/22 is counting towards my IRS 2023 total (but not my employer's) so they took out taxes on the last reimbursement check because I was over for IRS 2023 tuition limit but not employer's. 

I'm confused that it has changed but I also feel like I should include the tuition reimbursement for the year I accrued the cost. But the person in HR is insisting since I didn't receive the funds until 01/23, it must be included in 2023 tax return.

[tagteam]

HR might be technically correct (in other terms), but you may want to speak with someone in accounting (or whoever is responsible for payroll).

[kar62]

Hello

Thanks for the reply. What did you mean "in other terms"?  Mostly I don't understand why my company has a diiferent "year" for tuition reimbursement than the calendar year, which means their "year" and the IRS's year don't overlap perfectly, creating unnecessary confusion and preventing employees fully enjoying the tuition benefit. I also looked and it seems the IRS does allow reimbursement to occur within the first 3 months on the next year to count towards the previous year, similar to IRA contributions. I think they can change it if they want, but would rather not have to put the effort in. 

But I will contact out accounting department. 

[Hal_Al]

You say "I also looked and it seems the IRS does allow reimbursement to occur within the first 3 months on the next year to count towards the previous year, similar to IRA contributions".  Do you have a reference for that. 

I believe your employer is doing it right. By law your employer can only give you $5250 maximum, tax free, per year. It goes by the year of the reimbursement, not the year of the education.  I believe the 3 month rule, you saw, only has to do with whether you qualify for a tuition credit or not. 

 If you got more than $5250, in a calendar year, the amount above $5250 is  included in box 1 of  your w-2, as income.  Since you have essentially paid tax on that part, it  is considered your after tax money and that amount can be used  to claim the tuition credit, for the year the tuition was paid. .