Company Offered Education Programs

Company owners – are you thinking about paying for your employee’s education? There are four different routes you can choose from:

  1. Job-Related Education as a Working Condition Fringe Benefit
  2. Education Provided Under a Sec. 127 Educational-Assistance Program
  3. Qualified Tuition Reduction Programs of Educational Institutions
  4. Scholarship Programs Under Employer-Related Private Foundations

 

The first two are the most popular options, and we will detail those a little further below.

Working Condition Fringe Benefit

Sec. 132(a)(3) allows an employee to exclude working condition fringe benefits from gross income. Additionally, under Sec. 1.162-5, education expenses are deductible as ordinary and necessary business expenses if the education:

  1. Maintains or improves skills required by the individual in his employment or other trade business, or
  2. Meets the express requirements of the individual’s employer, or the requirements of applicable law or regulations, imposed as a condition to the retention by the individual of an established employment relationship, status, or rate of compensation.

 

However, there are some instances where education expenses are not deductible, i.e. If the program of study will lead to the employees qualifying for a new trade or business. If the education meets the criteria of Sec. 1.162-5, the employer’s payment or reimbursement for the education expenses will not result in taxable income to the employee.

Education Provided Under a Sec. 127 Educational-Assistance Program (EAP)

Sec. 127 allows an employee to exclude up to $5,250 each year from income for amounts received pursuant to an employer-sponsored tuition/education assistance. The following are required by the employer in order to receive tax-preferred treatment:

  1. Written plan – a separate written plan for the exclusive benefit of employees
  2. Nondiscrimination – eligibility for the program does not discriminate in favor of highly compensated employees
  3. Employee choice – employees are not given a choice between benefits under the program or taxable compensation
  4. Funding – the program may or may not be funded
  5. Notification – reasonable notification of the availability and terms of the program must be provided to eligible employees

 

The disadvantage to this option compared to the fringe benefit is that a plan must be in place and it is limited to $5,250 each year. However, unlike fringe benefits, EAPs do not require the education expense to be work-related.

Before you decide on the tuition assistance program, please consult with your CPA. If you would like more information, please contact Mike Dempsey, CPA at mdempsey@bwtpcpa.com or 314.576.1350.

Join Us For a Free Seminar on College!

On Friday, May 18, 2018 join BWTP for our latest installment of our Education With a Bite series. That day we will be joined by David Ressner, a wealth advisor at Buckingham Strategic Wealth, to talk about finding and affording a great college education. For more information, please click on the link below to view the event flier. You may also contact either Angie Thomas at athomas@bwtpcpa.com or Becky Dell at rdell@bwtpcpa.com.

May 2018 Education With A Bite

529 Plans

A 529 plan is a tax-advantaged investment account offered in the United States as a means to save for higher education expenses for a beneficiary. Many states offer their own version of a 529 plan.

529 plans are no longer just a tax effective means to save for college. Among many changes in the recent Tax Cuts and Job Act is a provision allowing you to distribute up to $10,000 per beneficiary during the taxable year for tuition expense incurred in relationship to a public, private or religious elementary or secondary school.

Most states, including Missouri, allow a deduction from your state taxable income for making contributions to state qualified 529 plans. Missouri allows this deduction for up to $8,000 per taxpayer, per year for contributions made to any state sponsored plan.

Beginning in 2018, you can now take tax free distributions from the account for qualified tuition expenses for Kindergarten through 12th grade, so long as you do not exceed $10,000 per beneficiary.

If you have any questions about 529 plan contributions, please contact Jaclyn Ellis, CPA at 314-576-1360 or jellis@bwtpcpa.com.

Sleep Medicine and Social Media – Half Day Seminar!

Earn 4 CE credits at our half day seminar in St. Louis. Two seminars in one. Dr. Postol will discuss incorporating Dental Sleep Medicine into your practice.

MySocialPractice will discuss the Social Media tools available to effectively communicate to your new and existing patients.

Contact Angela Thomas at 877.253.5084 to register.

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