Spectrum - Volume 18 Issue 22 February 29, 1996 - Graduate tuition assistance taxable

A non-profit publication of the Office of the University Relations of Virginia Tech,
including The Conductor , a special section of the Spectrum printed 4 times a year

Graduate tuition assistance taxable

By Dennis Eavey, human resources manager,
Personnel Services

Spectrum Volume 18 Issue 22 - February 29, 1996

As of this writing, graduate-level tuition assistance to employees constitutes taxable income for the person receiving the assistance, in our case waiver of tuition and fees.

Undergraduate work is not affected at this time. For the last several years, educational assistance provided to employees taking graduate-level courses has been exempt from state and federal withholding taxes and Social Security taxes under section 127 of the Internal Revenue Service Code. The exemption has a history of lapses and renewals. At the present, the exemption expired at the end of 1994. Current proposed legislation would restore the exemption retroactively for 1995, but would not extend it into 1996. Therefore, the Payroll Department will begin Spring Semester 1996 to add the value of graduate tuition and fee waivers to gross income and withhold taxes on it.

This may be done over several checks to minimize the impact to employees. Individuals will be sent a letter before the deduction of those taxes telling them which check(s) will be affected. The Bursar's Office has agreed to extend the period to drop graduate courses taken under the waiver program without financial penalty through the end of February. This will allow persons who do not wish to incur the additional taxes to withdraw their waiver request before taxes are withheld and money is added to year-to-date earnings.

Please contact Wayne Bishop, payroll manager, at 1-7586 if you have questions about the process.