Employer paid education taxes deducted over different tax years

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Posted by ken.mott@gmail.com on November 11, 2009, 11:45 am Please log in for more thread options So my wife is doing an MBA and her company pays for school. Recently they changed their tax withholding procedures. Before she was able to claim it was work related so no taxes were withheld. Now the company claims that is no longer the case and they must withhold taxes on anything over the 5250 and it gets spread over 7 pay periods. The issue is that they are just now starting to deduct on the amount over the 5250. And it will span into next year. So on taxes for 2009, do we just treat the education over the 5250 that they are deducting on as school expenses paid by us this year. Or do we have to only include the proportion that has had taxes withheld from it this year. Just for numbers sake. Total education this year paid by company = $10250 Total tax free = $5250 Total to be taxed = $5000 Taxes spread over 7 pay periods of 2 weeks each. So taxes on ~$715 a pay period. Taxes taken out this year to just be in December So ~$1430 this year. Remainder taken out next year. So on 2009 taxes to we have education expenses of $5000 or just the $1430 since that what was taxed, then next year we deduct the remainder? -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> Posted by removeps-groups@yahoo.com on November 11, 2009, 12:51 pm Please log in for more thread options > So my wife is doing an MBA and her company pays for school. Recently > they changed their tax withholding procedures. Before she was able to > claim it was work related so no taxes were withheld. Now the company > claims that is no longer the case and they must withhold taxes on > anything over the 5250 and it gets spread over 7 pay periods. > The issue is that they are just now starting to deduct on the amount > over the 5250. And it will span into next year. > So on taxes for 2009, do we just treat the education over the 5250 > that they are deducting on as school expenses paid by us this year. Or > do we have to only include the proportion that has had taxes withheld > from it this year. > Just for numbers sake. > Total education this year paid by company = $10250 > Total tax free = $5250 > Total to be taxed = $5000 > Taxes spread over 7 pay periods of 2 weeks each. So taxes on ~$715 a > pay period. > Taxes taken out this year to just be in December So ~$1430 this year. > Remainder taken out next year. > So on 2009 taxes to we have education expenses of $5000 or just the > $1430 since that what was taxed, then next year we deduct the > remainder? >From publication 970 on the lifetime credit: What Expenses Qualify <Quote source="http://www.irs.gov/publications/p970/ ch03.html#en_US_publink100020834"> The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in 2008 for an academic period beginning in 2008 or in the first 3 months of 2009. </Quote> The tuition and fees deduction at http://www.irs.gov/publications/p970/ch06.html#en_US_publink100020942 has the same feature. So I think the entire $5000 is an expense this year. Be aware that if your AGI is too high, you can't take the lifetime credit.  And if your AGI is higher, then neither is available. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> Posted by Phil Marti on November 12, 2009, 6:12 am Please log in for more thread options On Nov 11, 11:45 am, "ken.m...@gmail.com" wrote: > So my wife is doing an MBA and her company pays for school. Recently > they changed their tax withholding procedures. Before she was able to > claim it was work related so no taxes were withheld. Now the company > claims that is no longer the case and they must withhold taxes on > anything over the 5250 and it gets spread over 7 pay periods. > The issue is that they are just now starting to deduct on the amount > over the 5250. And it will span into next year. > So on taxes for 2009, do we just treat the education over the 5250 > that they are deducting on as school expenses paid by us this year. Or > do we have to only include the proportion that has had taxes withheld > from it this year. Withholding is a totally separate issue from what is taxable income. Everything that the company has paid that they think is taxable will be included in 2009 income on her W-2.  That number is your starting point for figuring what, if any, tax benefits you get from those payments in the form of business-related Schedule A deductions or education credits/adjustments to income.  See Publication 970, It sounds like her 2010 withholding may be artifically high (since some of it will be based on income reported in 2009), so she'll want to take a look at potential 2010 adjustments to her W-4. Phil Marti Clarksburg, MD -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used,   >> << nor can it used, for the purpose of avoiding penalties  >> << that may be imposed upon the taxpayer.                  >> <<                                                         >> <<   The Charter and the Guidelines for submitting posts   >> <<  to this newsgroup as well as our anti-spamming policy  >> <<                  are at www.asktax.org.                 >> <<         Copyright (2007) - All rights reserved.         >> << ------------------------------------------------------- >> This Thread        Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape Employer paid education taxes deducted over different tax years ken.mott@gmail.com 11-11-2009  Re: Employer paid education taxes deducted over di... removeps-groups@yahoo.com 11-11-2009  Re: Employer paid education taxes deducted over di... 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