Can employer include more school reimbursement on w2 than attended in a given year?

Question

I received a w2 form for employer paid education. I attended school full-time (four quarters) in 2006, but my employer also included the last 2 quarters of 2005 plus all four 2006 quarters in my 2006 w2, for a total of 6 quarters of school tuition that I have to pay tax on. I should have been taxed on the 2005 quarters on my 2005 taxes by getting a separate w2 for tuition then, but it all got heaped together on my 2006 instead. Do I just get taxed for all 6 quarters or should they fix this? Hmmm, odd situation I realize. Thanks

Well, the school was paid directly on my behalf, so I never saw any money. Also, I believe the 2005 quarters were paid in late 2005. I hope that clarifies a little.

Actually,the $5250 is a big issue because if the 2005 tuition was paid in 2005, $5250 wipes out most of that for the 2005 tax year. After that, in the 2006 tax year, that same $5250 amount could be used again on the remaining 4 quarters. Instead since it appears that all 6 quarters are lumped together under the 2006 tax year, the $5250 amount can only be used once. Quite a bummer actually.

Also, since I didn't pay directly, is this a possible tax deduction (maybe Lifetime Education)? In other words, is having an employer go directly to the school and paying them for my tuition (again this is considered taxable income) the same as my employer giving me the same amount (let's say as a bonus) and then me turning around and paying my own tuition? The latter, would qualify for a education deduction, so would the former situation with the middleman (me) cut out be the same? Questions, questions.

Answer 1

Benefits over $5,250. If your employer pays more than $5,250 for educational 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 does not 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 Publication 15-B, Employer's Tax Guide to Fringe Benefits.

Publication 970
http://www.irs.gov/publications/p970/ch12.html#d0e11563

Answer 2

The payments for school should be included in the year your employer PAID the school. That is not necessarily the year you attended classes. If you never actually saw the money, why do you believe the 2005 quarters were paid in late 2005? Were those payments included on your 2005 W-2?

Rob: your answer addresses IF the payments should be included in income. The question asked WHEN they should be included. You did not address that issue.

Answer 3

It depends on when they paid they expenses, If they did not pay the tuition until 2006 then it would be reported as paid in 2006

Answer 4

Depends when they cut you the reimbursement check.

If they cut you the check in 2006 for all of those quarters, then you pay in 2006.

Answer 5

When did you actually get the money reimbursed to you? It should have been on the W-2 for that year.