.comment-link {margin-left:.6em;}

I Hate Linux

Friday, September 09, 2005

Reimbursement Loophole

Related to my previous post on my tuition reimbursement problems, this morning I had a realization of an oddity and potential loophole in the program here at my company, one I am not likely to take advantage of (mostly due to my liking my job here), but still thought it worth sharing (including the HR person who I mentioned it to this morning).

My company’s program is pretty simple, they pay the school bills and if you leave the company voluntarily within a year after a payment, you need to repay the company that amount.

Pretty simple right?

What about when the reimbursement is reported as income on ones pay stub and W-2 at the end of the year?

With the IRS tax free limit being $5,250, should an employee receive... $5,000 in reimbursement within the year and leave, it’s pretty easy for the company to ask for that money back and get it (short of the whole, coming up with $5,000 in cash) because of that money not being externally reported.

This gets a little hairy though when one moves beyond that IRS limit. Let’s say the employee received a total of $10,000, or even $15,000, well beyond the limit. Reclaiming the first $5,250 is pretty easy... the rest though could be tricky, if at all possible IMO given that the amount has been treated as part of the employee’s regular income and has paid federal income tax as well as FICA on it.

It’s pretty safe to say that if the employee received $10,000 above the limit and was asked/required to pay it back, it would cost them far more than $10,000 depending on their tax bracket.

In taking to the HR person about this earlier, she said that if such a thing were to happen, here, she thought that they would take into account the taxes paid by the employee already on it and adjust the end amount accordingly.

No matter how such an issue would be resolved, it is still is quite an interesting one and I do not see it occur.

1 Comments:

  • Is higher education even worth it then, considering the quality of education you're receiving? Man alive, that is some tricky stuff.

    By Blogger doschman, at 10:27 PM  

Post a Comment

<< Home