Author: cadams

Tax Tip:  Educational Benefit Taxation

Educational benefits received by a University employee, his/her spouse, and/or child(ren) may be taxable to the employee.

Some examples of taxable educational benefits include:

  • Tuition benefits for a child who is not an IRS dependent of the employee, including a child who is age 24 or over during the calendar year
  • Graduate level tuition benefits for a spouse or child (limited exceptions may apply)
  • Graduate level tuition benefits for an employee in excess of $5,250 per calendar year (limited exceptions may apply)

For those educational benefits which are taxable, Federal, State, and Social Security taxes will be withheld from the employee’s payroll checks at the end of each semester in which the educational benefit was received.  Taxes will be withheld over four (4) pay periods for biweekly-paid employees and over two (2) pay periods for monthly-paid employees.

The Tax Office will notify the employee by email in advance of the taxation.  The taxable educational benefit will appear as a line item on the employee’s pay stub in each period where taxation occurs.  The number shown on the pay stub is the amount of benefit that is being taxed in that pay period, not the amount of taxes being deducted.  The tax deduction amounts will vary depending on the employee’s individual tax bracket and filing status.

For further details, refer to the following website links:

http://taxoffice.ua.edu/fringe-benefit-taxation/#Education

http://hr.ua.edu/benefits/other-benefits – see Policy 702.00 Educational Benefits

Tax Tip:  60-Day Rule for Expense Reports

To avoid tax consequences on expense reimbursements, University employees should remember the 60-Day Rule:

Expense reports for out-of-pocket expenses must be submitted within 60 days from the date the expense was incurred (in the case of travel, within 60 days from end of trip).

Per federal tax regulations, expenses submitted after 60 days will be reported as taxable income to the employee, and applicable Federal, State, FICA and Medicare taxes will be deducted from a subsequent salary check.

Timely reporting and submission of expense reports is the responsibility of the employee being reimbursed regardless of whether the employee self-submits or has designated a delegate for expense reporting.

When combining smaller instances into one expense report, employees are encouraged to submit at least once a month. (For example, mileage logs or multiple small out-of-pocket expenses)

The 60-Day Rule is stated in the University’s spending and travel policies and is necessary to comply with the IRS safe-harbor guidelines for expense reimbursements. For more information, refer to the following website links:

http://accountspayable.ua.edu/spending-policy/#Requests

http://accountspayable.ua.edu/travel-policy/#Documentation

http://taxoffice.ua.edu/fringe-benefit-taxation/#ExpenseReimb