Academic journal article Journal of Accountancy

Educational Assistance Refunds

Academic journal article Journal of Accountancy

Educational Assistance Refunds

Article excerpt

Employers and employees who participated in employer-provided educational assistance plans in 1995 or 1996 are entitled to refunds. Before 1995, Internal Revenue Code section 127 provided an employee with an annual exclusion from income of up to $5,250 for educational assistance benefits (EABs). Under the Small Business Job Protection Act of 1996, this exclusion was reinstated and made retroactive to January 1, 1995.

Employees who previously paid taxes on EABs now can get refunds for federal income taxes paid in 1995 and Social Security and Medicare taxes paid in 1995 and 1996. Employers can obtain refunds for Social Security, Medicare and unemployment taxes.

The Internal Revenue Service has made it easier to get these refunds. IlKS information release 96-36 said employees who paid income taxes in 1995 on excludable EABs can receive their refunds simply by filing Form 1040X, Amended U.S. Individual Income Tax Return, and attaching Forth W-2c, Statement of Corrected Income and Tax Amounts, showing the corrected wages for 1995. To expedite the process, taxpayers are advised to print "IRC 127" in the top margin of form 1040X. Employees who qualify for the earned income credit should read IRS publication no. 596.

For both 1995 and 1996, employees will receive their Social Security and Medicare tax refunds from the employers that provided the educational assistance. …

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