Taxable Employer Tuition Reimbursement

[ADonahoe1]

I have an employee that received the $5,250 non-taxable tuition reimbursement. He also received an additional $6,500 that was taxable, this was all paid in 2022. He quit in 2023 and had to pay back $5,500.00, in 2023, to the company. Does the company need to account for this in the employee's payroll in 2023 or does the employee do it themselves through their taxes?

[Opus 17]

If the employee repaid wages in 2023 and was still employed in 2023, you should adjust their W-2 to reflect the net wages they were paid in 2023.  Ideally, you will adjust the social security and medicare tax withholding and refund that to the employee.  (This will also result in a reduction of your share of the employment taxes.)

Think of it as if, instead of repaying a lump sum, you had reduced their salary by the amount of the repayment, such as reducing their salary by $500/week for 11 weeks.  That's the net result, and that's what the W-2 should reflect.