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TAXES

Tuition-Tax Trap

Guidelines for applying payroll and income tax to tuition reimbursement.
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Tuition reimbursement once enjoyed special tax status. But the provision that exempted reimbursement from payroll and income tax lapsed in June 1992. When it has lapsed before, Congress has reinstated it. President Clinton has proposed a permanent extension of the provision as part of his tax package. Until Congress passes that, how should employers handle reimbursement? You could grant the tuition payment as an interest-free loan and forgive the loan when tax-free status is reinstated. If Congress does not reinstate it, you could ask employees to repay the amount you will owe as tax on the loan. Explain your new situation to employees. Sue Meisinger of the Society for Human Resource Management says, "They see only the employer, not Congress futzing around."

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