| Tuition reimbursement and tax law changes -- U.S. employees only
On December 31, 1988, IRS Code Section 127 expired. This law provided that
non-job-related tuition reimbursements were generally not included in employees'
taxable income (up to an annual cap of $5,250). Since that time, tuition
payments have had to be classified as "taxable" or "non-taxable," based on the
criteria included in Digital's "Application for Training" forms, and in Section
4.13 of the "U.S. Personnel Policies and Procedures" manual.
Congress and the President are in the process of enacting an extension to IRS
Code Section 127, effective retroactively to January 1, 1989, and extending
through next September 30, 1990. Although the President has not yet signed
this bill into law, he is expected to do so in the near future.
This extension covers only NON-GRADUATE level courses. Graduate courses
classified as taxable prior to the reinstatement of Section 127 will remain
taxable. Graduate courses classified as non-taxable prior to the
reinstatement of Section 127 are still non-taxable.
Employees who are affected by this recent extension are those employees who
have received TAXABLE tuition payments for NON-GRADUATE level courses since
January 1, 1989. Those employees who received taxable tuition payments for
graduate level courses or those who received non-taxable tuition payments,
are not affected by this recent extension.
The affected employees' year-to-date gross wages will be adjusted to reflect
the fact that these 1989 payments are non-taxable. Further, in certain
circumstances, the amount of taxes withheld will also be adjusted.
Digital will not be issuing any tax refunds. Employees can claim any
withheld taxes against their full 1989 tax liability on their 1989 tax
returns. These adjustments will appear on paychecks issued on December 21,
1989.
In addition, Corporate Payroll has been holding (i.e., not processing) any
"Application for Education and Training" forms received on or after Monday,
December 11, 1989. They will send these applications back to employees,
for processing via Petty Cash.
All "Application for Education and Training" forms will now be processed via
local Petty Cash, except if the applications are for:
o Career-related, graduate courses, which are determined by an employee's
manager to be taxable.
o Career-related, non-graduate courses, which are determined by an
employee's manager to be taxable, only if that employee's total amount
reimbursed for career-related/taxable courses for the calendar year
exceeds $5,250.
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| While we are at it it should be noted that Career Related Courses
Policy has also been recently modified effective November 1, 1989.
The two main changes if I am not mistaken are,
� You have to be in DEC for three years.
� And only accredited colleges or universities and employee
must receive credit for them.
For more information check out the ORANGEBOOK.
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| Hi,
I am trying to locate a memo that talked about the IRS law change
regarding the TAXABLE and NON-TAXABLE course status. I looked the
Personal Policy regarding this but it does not seem that the policy
is up-to-date.
I remember seeing a memo few weeks ago (4-6) that talked
about the law change for 1989 year. Did anyone else see that
information ??
thank you,
Robert
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