Hello, all. I would appreciate any guidance with the following tax situation.
FactsI work full-time at a university. I’m currently enrolled full-time in an executive MBA program at the same university. My university covers the cost of the tuition for my program, but they report it as taxable income on my W2.
The university pays the government the amount of the tax burden on the tuition benefit. The university charges the same amount to my bursar’s bill, and I owe the university. I would like to get back on my tax return as much of the taxes on the tuition as possible.
My questions:Do I have any chance of getting any of that money back? I already filed my taxes, but it might be worth having an accountant tackle this and file an amended return.
Is the reasoning I provided below at all accurate?
Is there a tax forum somewhere on the interwebs where it would be better to pose this question?
ReasoningBased on my reading of the IRS publications, my coursework meets the necessary criteria for a qualifying educational expense, and the exclusions don’t apply. As a result, my employer should not have reported the tuition benefit as taxable income, and I should get the money back.
The MBA courses meet the test for qualifying work-related expenses because they maintain or improve skills for my current job. I work in the university’s division of budget and planning. I do things like compensation analysis, survey research, yield modeling, etc., and I think I have a good case to say the MBA courses maintain and improve the skills needed to accomplish these sorts of tasks.
These courses are not required to meet the minimum educational requirements for my job. I had this job for 7 years before I began this program, and an MBA was not required for this position.
This program will not qualify me for a new trade or business. I plan to continue working in higher education, and although I hope to progress in my career, it’s not as though this degree qualifies me to go be a veterinarian.
I included additional details below about the taxes and some excerpts from what I think are the relevant IRS publications. Thoughts?
Tax detailsThe net tax effect for 2015 is $12,322.
34,400 (tuition benefit)
5,250 (exempt from taxation)
29,150 (taxed tuition benefit)
12,322 (tax liability)
Breakdown of Taxes
7,287.50 (federal)
2,804.23 (state)
422.68 (medicare)
1,807.30 (SS)
Publication 970 Tax Benefits for Educationhttps://www.irs.gov/pub/irs-pdf/p970.pdf Benefits over $5,250. If your employer pays more than $5,250 in educational assistance benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income.
Working condition fringe benefit.
However, if the benefits over $5,250 also qualify as a working condition fringe benefit, your employer doesn't have to include them in your wages. A working condition fringe benefit is a benefit which, had you paid for it, you could deduct as an employee business expense. For more information on working condition fringe benefits, see Working Condition Benefits in chapter 2 of Pub. 15-B, Employer's Tax Guide to Fringe Benefits.
Qualifying Work-Related
Education
You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests.
The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
The education maintains or improves skills needed in your present work.
However, even if the education meets one or both of the above tests, it isn't qualifying work-related education if it:
Is needed to meet the minimum educational requirements of your present trade or business, or
Is part of a program of study that will qualify you for a new trade or business.
You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree.
From the section on Working Condition Benefits in Publication 15-B https://www.irs.gov/pub/irs-pdf/p15b.pdf Working Condition Benefits
This exclusion applies to property and services you provide to an employee so that the employee can perform his or her job. It applies to the extent the employee could deduct the cost of the property or services as a business expense or depreciation expense if he or she had paid for it. The employee must meet any substantiation requirements that apply to the deduction. Examples of working condition benefits include an employee's use of a company car for business, an employer-provided cell phone provided primarily for noncompensatory business purposes, and job-related education provided to an employee.
…
Education.
Certain job-related education you provide to an employee may qualify for exclusion as a working condition benefit. To qualify, the education must meet the same requirements that would apply for determining whether the employee could deduct the expenses had the employee paid the expenses. Degree programs as a whole don't necessarily qualify as a working condition benefit. Each course in the program must be evaluated individually for qualification as a working condition benefit. The education must meet at least one of the following tests.
The education is required by the employer or by law for the employee to keep his or her present salary, status, or job. The required education must serve a bona fide business purpose of the employer.
The education maintains or improves skills needed in the job.
However, even if the education meets one or both of the above tests, it isn't qualifying education if it:
Is needed to meet the minimum educational requirements of the employee's present trade or business, or
Is part of a program of study that will qualify the employee for a new trade or business.
