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Forum
-> Household Management
-> Finances
amother
Puce
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Fri, Jun 23 2017, 7:21 am
How does this work exactly? Is it above board? Is there any reason that a yeshiva would not be agreeable to this arrangement? Thanks.
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watergirl
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Fri, Jun 23 2017, 8:09 am
As in pre tax? Only if the employer happens to be the yeshiva.
Although a daycamp that I worked at used to write salary checks directly to some workers yeshivas.
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pesek zman
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Fri, Jun 23 2017, 8:14 am
I literally don't understand the question
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amother
Puce
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Fri, Jun 23 2017, 8:41 am
pesek zman wrote: | I literally don't understand the question |
If I work in school A and make 25,000, and I have a child in school B who I owe 5000 in tuition for, can school A pay 5000 to school B pre tax which will lower my taxable income to 20000?
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amother
Blue
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Fri, Jun 23 2017, 8:42 am
AFAIK, this is something called QTR = qualified tuition reduction. It is legal if the employer is an educational institution to pay some of the employee's salary (pre-tax) to another educational institution for tuition. IME the yeshivas/schools recieving the checks are fine with the arrangement as long as they know they will be paid on time.
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pesek zman
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Fri, Jun 23 2017, 8:43 am
amother wrote: | If I work in school A and make 25,000, and I have a child in school B who I owe 5000 in tuition for, can school A pay 5000 to school B pre tax which will lower my taxable income to 20000? |
Got it. Your title doesn't specify that you are asking this question of other teachers.
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amother
Puce
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Fri, Jun 23 2017, 8:49 am
pesek zman wrote: | Got it. Your title doesn't specify that you are asking this question of other teachers. |
It's not exclusive to teachers. Any frum employer might consider this. I just want to find out if anyone has this arrangement and what the nuances may be.
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amother
Coffee
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Fri, Jun 23 2017, 8:56 am
amother wrote: | It's not exclusive to teachers. Any frum employer might consider this. I just want to find out if anyone has this arrangement and what the nuances may be. |
We have this arrangement. My husband's a teacher. What nuances do you want to know about? The checks go straight from my husband's school to my kids's schools, and we've had no problems with this set up.
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amother
Lilac
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Fri, Jun 23 2017, 9:04 am
As the above posters said, this is only above board if you work in an educational institution. It's called tuition redirection and is complete legit. If you work in another office this can be a benefit to the employee but it's not counted for the employer as payroll and doesn't benefit them at all which is why most offices will not offer it.
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amother
Powderblue
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Fri, Jun 23 2017, 9:09 am
amother wrote: | It's not exclusive to teachers. Any frum employer might consider this. I just want to find out if anyone has this arrangement and what the nuances may be. |
Any employer can do it - but if the employer is not an educational institution then you pay tax on the money... assuming that you and your employer are doing everything 'above board'.
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amother
Puce
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Fri, Jun 23 2017, 9:27 am
amother wrote: | Any employer can do it - but if the employer is not an educational institution then you pay tax on the money... assuming that you and your employer are doing everything 'above board'. |
I didn't know that. If that's the case, what is the advantage of having a non educational employer pay tuition? Also, why should it make a difference if it's an educational employer or another employer?
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amother
Lilac
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Fri, Jun 23 2017, 9:30 am
There is no advantage for the employer if it's non educational . Only for employee the they can claim less income. It's a tax law benefit for people who work in educational institutions.
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Ruchel
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Fri, Jun 23 2017, 9:34 am
No I don't know anyone doing this.
I do know schools giving a cut in tuition (bh!) or even no tuition to teachers, on top of normal salary.
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amother
Powderblue
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Fri, Jun 23 2017, 9:34 am
amother wrote: | I didn't know that. If that's the case, what is the advantage of having a non educational employer pay tuition? Also, why should it make a difference if it's an educational employer or another employer? |
Here is an IRS publication that spells it out fairly well. (includible in gross income as wages means subject to income tax)
The advantage is for the school who is owed the tuition - they know they are going to get their money.
(I assumed you are in the US)
https://www.irs.gov/pub/irs-wd/201516030.pdf
LAW AND ANALYSIS
Generally, amounts paid to or for the benefit of employees are presumptively
compensatory in nature, and ordinarily includible in gross income as wages. Section
117(d)(1) of the Internal Revenue Code, however, provides a special rule in the case of
a “qualified tuition reduction:” section 117(d)(1) provides that gross income shall not
include any “qualified tuition reduction.”
Section 117(d)(2) defines a “qualified tuition reduction” as the amount of any
reduction in tuition provided to any employee of a section 170(b)(1)(A)(ii) educational
organization for the education (below the graduate level) at such organization (or
another organization described in section 170(b)(1)(A)(ii)), of (A) such employee, or (B)
any person treated as an employee (or whose use is treated as an employee use)
under the rules of section 132(h). Section 132(h) refers, generally, to spouses and
dependent children of employees.
Section 170(b)(1)(A)(ii) describes an educational organization as one which
normally maintains a regular faculty and curriculum and normally has a regular enrolled
body of pupils or students in attendance at the place where its education activities are
regularly carried on. An entity described in section 170(c)(1) or (2), or an institution that
is operated as an activity or function of such an entity, may qualify as an “educational
organization” described in section 170(b)(1)(A)(ii) for the purposes of section 117(d)
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pesek zman
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Fri, Jun 23 2017, 10:10 am
amother wrote: | It's not exclusive to teachers. Any frum employer might consider this. I just want to find out if anyone has this arrangement and what the nuances may be. |
I hear you. I'm sorry, your title didn't specify a frum employer either. My employer a is hospital so they don't pay my tuition
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amother
Brown
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Fri, Jun 23 2017, 1:48 pm
Schools offer QTR.. the tuition comes off the salary and does not show as income
Hospitals offer flex spend accounts which can cover child care - it is paid pretax
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