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Question
My employer promoted me to a Manager with the stipulation that I go to college and get a 4 year degree. (I never attended college) If I did not want to agree to this, I would lose my job and I cannot be promoted until I finish and get a bachelors degree. I was told they want all managers at our company to have at least a 4 year degree and stated they would pay for everything so I could achieve this. Before my promotion most of the managers at the company have a 4 year degree, but not all of them do. They have not been required to finish their education and get their bachelors degree. At the same time I was promoted another gentleman was as well, who also did not have a 4 yr degree. He was told the same thing I was, so the company arranged a meeting between our HR Manager, the two of us and the local university to discuss a plan for he and I. There has never been a contract or papers signed, it is all verbal. 2013 was the first year for attending classes and everything went well; and the company paid for everything as promised. (i.e. the classes, books, parking fees, etc.) I was told at the end of 2013 our finance department said both he and I would have this added to our payroll and we had to make the payments for everything ourselves to the university. I argued it would be taxed and I would not have the amount needed to pay for everything without taking money from my pocket. They told me I can claim it on my taxes and recoup the money that way. I researched it on IRS.gov and found information about anything up to $5250 is not taxed and they don't need to include it as taxable income on my paycheck until that amount is exceeded. When I asked the person in our finance department who does taxes about this, he said because we do not have an actual employer education assistance program, this is not true for myself and the other gentleman. According to them, all of it needs to be added to our income and taxed. This will throw me into a higher tax bracket as well. Is there anything I can do about them changing the rules of the education plan they are requiring of me and the taxation of this additional money? Is there anything which states just because they do not have a written education plan for all employees this doesn't fall under the employer education assistance tax rules? I found another statement on IRS.gov that says, and I'm paraphrasing: it is considered to be an employer education assistance plan if the employer requires the employee to go to school in order to keep his/her job.

Looking forward to your response,
Kerry

Answer
Kerry:

The employer can set his own rules but his rules can not exceed the IRS rules.  It appears that the employer decided that the cost of your education will be included in you gross income for the year and you will pay taxes on the income.  The employer can do that it is his business.  He did not have to promote you and give you the opportunity to keep the promotion by paying for your BS degree. The most you may be required to pay is 28% tax on the income.  However, in recent years no has seen tax bracket like we had back in the day.  For instance I remember getting a 100.00 a month pay raise that after calculation I had to pay the 100.00 plus and additional 25.00 a month for the pay raise.  Therefore, I do not consider paying a 28% tax on a college education.

There is no law that requires an employer to set up an employee assistance program nor requires an employer to pay for an employee's education that the employer can not require the employee to pay the income tax on the additional wages.  When the employer pays for an employees education it is wages.

John  

Tax Law (Questions About Taxes)

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John L. Tidwell

Expertise

Unemployment tax law both state and federal; determination of employer employee relationship; the usual 20 commonlaw factors for making that determination; and what makes me a liable employer.

Experience

Over 20 years of field audit experience with a state agency

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none

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Education/Credentials
Degree in Accounting from Falls Business College

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