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I Hate Linux

Friday, September 09, 2005

Expensive Reimbursement

Since January I have been working on a masters program at a local university and have benefited from my companies tuition reimbursement program where I end up only paying for books and the time... or so I thought.

Recently I was informed of a little IRS rule that I was previously not aware of... that the first $5250 of tuition reimbursement in the year is considered tax free... anything beyond that must be reported as taxable income. Nice thing to find out about in September.

The problem of course with this is that with the remaining 9 paychecks of the year (including today’s), the amount of above that limit that has been paid and will be paid by the end of the year is... enormous and if put on a check whenever they are applicable would eat away my take home pay significantly due to FICA, federal income tax and my 401k.

In order to make this less painful, I decided to have them add an additional $830 to each of my paychecks for the rest of the year, as well as increase my number of exemptions from 0 to 7 so that the total amount of tax being taken out doesn’t kill me now, I’ll just need to come up with the extra cash before filing my taxes in the spring.

I guess the moral of this story is to be a little more aware of the potential tax liabilities of such free seeming money.

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