Tuition Reimbursement Processing
amb_ny
3 Posts
Wondering what opinions are about running tuition reimbursements through the payroll system, both taxable and non-taxable? The alternative would be to reimburse through Accounting, but payroll seems a better option to monitor taxable thresholds and for reporting. In our payroll system, we have set up two methods for reimbursing tuition - non-taxable will simply add the amount to the check but is not taxable or included on the W2 as earnings, and the taxable option adds the amount to the tax base and is included on the W2 as earnings. Thoughts?
Comments
As long as the data in is good....i.e. someone is looking at what is truly taxable, I prefer to run it through payroll -- especially the taxable part -- at the time of reimbursement rather than reimbursing through accounting and then having to tax non-existent funds.
That said, I personally would set up some type of report that must be signed off on by others outside the payroll process prior to payment -- i.e. the employee, their manager (or whoever approves the tuition reimbursements) and even possibly accounting. Someone else should be keeping the backup documents. Because I wouldn't want to be liable for making a mistake on the taxability.
Taxability not only depends on specific thresholds, but also sometimes the type of class and who is the main benefactor (i.e. The taxability rules can possibly get hairy depending on how it is setup). Generally I leave that to others. For example, HR tells me the taxability of benefits, accounting tells me the taxability of fringe benefits, etc. Because they are the ones that know about them (value, etc). {And yes, I talk to myself since I do both HR and payroll *Ü*}