If Check goes straight to tuition

Amarante

Tue, Aug 29 2017, 12:02 pm

It is income. Why in the world wouldn't it be considered to be income? Tuition isn't tax deductible and therefore just because you are paying for tuition in a different manner has no impact on the deductibility.

At some point if the IRS bothers to audit your tax return, you would be liable for the taxes plus interest and could well also be on the hook for penalties.

If your employer is making that direct payment and not reporting the amount as paid to you by the IRS, they are also committing tax fraud. How is your employer reporting the amount paid to the school. Are they deducting it as a corporate charitable contribution. Charitable contributions can't be designated for an individual so if they are paying the school and stipulating it is on behalf of a specific individual, the school is also committing tax fraud by providing documentation of a legal charitable contribution by your employer.

This has been discussed in several threads.

shyshira

Tue, Aug 29 2017, 12:08 pm

Amarante wrote:

IRC 117
(d) Qualified tuition reduction
(1) In general
Gross income shall not include any qualified tuition reduction.
(2) Qualified tuition reductionFor purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) 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).

170(b)(1)(A)(ii)
an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on,

132(h)(2)
In general. Any use by the spouse or a dependent child of the employee shall be treated as use by the employee.

Last edited by shyshira on Tue, Aug 29 2017, 10:18 pm; edited 1 time in total

Amarante

Tue, Aug 29 2017, 12:16 pm

I believe this is just a reduction for an employee of that institution.

Section 117 (d) of the Internal Revenue Code allows employees of certain educational institutions, including nonprofit universities and colleges, to exclude from taxable income qualified undergraduate tuition reductions they, or their dependents, receive from their employer.

Perhaps I misread the OP but I didn't think she was asking about tuition reductions based on her employment at the school her children attend. If so, then it would qualify but it's not applicable for someone whose employer is not the educational institution attended by her children. Or at least that is how I understand that provision of the Tax Code.

SixOfWands

Tue, Aug 29 2017, 12:19 pm

shyshira wrote:

IRC 117
(d) Qualified tuition reduction
(1) In general
Gross income shall not include any qualified tuition reduction.
(2) Qualified tuition reductionFor purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) 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).

170(b)(1)(A)(ii)
an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on,

123(h)(2)
In general. Any use by the spouse or a dependent child of the employee shall be treated as use by the employee.

That doesn't appear to be what she's describing. She seems to work for School A, with a salary of $X. School A gives her a paycheck in the amount of Y% of $X. It then mails a check for the remainder of her salary to School B, to pay OP's son's tuition.

That's income to her. She's not an employee of School B.

shyshira

Tue, Aug 29 2017, 12:19 pm

Amarante wrote:

2) Qualified tuition reductionFor purposes of this subsection, the term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization or another organization described in section 170(b)(1)(A)(ii))

and employee is defined to include dependent children of employee

shyshira

Tue, Aug 29 2017, 12:23 pm

SixOfWands wrote:

School B is covered as "another organization described in section 170(b)(1)(A)(ii) "

SixOfWands

Tue, Aug 29 2017, 12:23 pm

shyshira wrote:

Its still not a tuition reduction. Its direct payment of a part of her tuition by her employer.

shyshira

Tue, Aug 29 2017, 12:39 pm

SixOfWands wrote:

Its still not a tuition reduction. Its direct payment of a part of her tuition by her employer.

She has a benefit from working at the school that she has reduced or no tuition for her child at another school. If not for 117(d) this benefit would be taxable, (included in gross income). The money paid to the other school directly reduces the tuition that the employee has to pay.

amother

Maroon

Tue, Aug 29 2017, 1:24 pm

amother wrote:

This is totally legal and not considered income. Agudah had a seminar with accountants discussing this. The link to the webinar is on Agudah website. It's not part of MAGI for Medicaid so does not have to be reported. For the IRS there is a special form to fill out formit not to be counted as income.

I was told the same thing by my accountant. (Only if you work in a school .) Someone else wrote it here as well with the source IIRC.

Shoshana37

Tue, Aug 29 2017, 2:18 pm

Amarante wrote:

I totally agree with above.

Cmon be nice

Tue, Aug 29 2017, 2:26 pm

Shoshana37 wrote:

I totally agree with above.

If you work for a school, assuming its set up correctly, they are allowed to LEGALLY pay tuition on your behalf and its not considered income. Its a benefit a school has. The IRS rules were posted earlier. And if thats the case it wont go on your paystubs/W2 either.

Also someone mentioned Torah umesorah setting it up. I believe what they set up was explaining how parsonage works, with is money paid to clergy members, tax-free, totally different than OP's question.