The Payroll Department aims to simplify the Graduate Tuition Remission process and provide exceptional service to our end-users. We’ve compiled some of our most frequently asked questions below.
What types of Tuition Remission are a taxable benefit?
Graduate-level tuition remission for employees that exceeds $5,250 in a calendar year is generally subject to income tax withholding. In limited situations, Graduate Tuition Remission benefits for employees may not be subject to taxation if they meet the requirements of a “working condition fringe benefit” under IRC Section 132(d). The determination must be done for each course.
The IRS requires that all graduate level Tuition Remission benefits be fully taxable for spouses and other eligible dependents of our employees.
What criteria must be met in order for a course to be deemed a “working condition fringe benefit” and thereby exempt from taxation?
According to section 132(d) of the Internal Revenue Code, all of the following criteria must be met in order for a course to be deemed tax exempt.
1. The educational course must be job-related, and either (a) maintain or improve job skills, or (b) be expressly required by the employer or by law.
2. The educational course must NOT (a) be needed to meet the minimum educational requirements of the current job, or (b) qualify the employee for a new trade or business.
Who makes the determination about whether a course meets the criteria for being treated as tax exempt?
The determination about whether a course meets the criteria is made on a course-by-course basis by the employee and their supervisor, and approved by Human Resources, based on interpretation of tax law, acting in the best interest of the University. Supervisors of staff should carefully review the employee’s position description to ensure that the criteria for exemption is met before approving.
For Faculty employees, a supervisory signature is not required and the form is submitted directly to HR for review. In general, courses would need to be in the discipline in which the faculty member teaches, or in a closely-related discipline, in order to be approved.
For taxable tuition remission, when does the tax impact occur?
Tax is reported by calendar year, not academic year, for this reason Spring semester graduate tuition remission requests will be processed after January 1 each year to ensure that your tax impact falls within the tax year in which you are taking the classes.
Is it at the University’s discretion to take out taxes?
The University is required to administer its tuition remission programs in compliance with all applicable IRS regulations. Unless the criteria is met for classifying a course as a “working condition fringe benefit:”, IRS regulations require taxing the value of employee graduation tuition remission for any value above $5,250 in a year.
How do I find out the amount of Tuition Remission I have received during a tax year?
You are encouraged to track your own tuition remission through student accounts. The Student Accounts department will send you a bill outlining the amount Tuition Remission that has been provided for each semester. This bill is also accessible via your MyPace Portal (Student Tab > Registration > Account Summary by Term). For more information regarding your bill, please visit the Student Accounts website.
For taxable tuition remission, how and when will the taxes be taken out?
Any taxable Tuition Remission will be divided over the remaining pay periods in the calendar year. The tax on the Tuition Remission will be calculated by payroll and deducted from your paycheck. The taxable tuition remission will appear on your paycheck stub as “Earning 803 Grad Txbl Tuit”. This is not the amount being withheld from your paycheck. This amount represents the Tuition amount you are being taxed on for the pay period.
When will my Tuition Remission be applied to my student account?
Your Tuition Remission form has to be approved by your supervisor, the Benefits and the Payroll department before it reaches Student Accounts for billing – you will receive a notification after each approval. On average, the tuition remission benefit will be applied to your student account within 1 week of your supervisor’s approval.
What should I do if I am taking additional courses?
If you are adding new courses that will be covered by the Tuition Remission benefit, you must submit a new Tuition Remission form, (please keep in mind each form is semester-specific). Payroll will recalculate your tax liability when the Tuition Remission form reaches our department. If you believe the additional course(s) meet the criteria for being deemed tax exempt, you will need to submit a new Graduate Tuition Remission Tax Waiver Application to GradTaxWaiver@pace.edu.
How will my tuition remission tax liability be affected if I drop courses?
If you drop courses after submitting your initial Tuition Remission form, you will need to fill out a new Graduate Tuition Remission Tax Liability form. Please keep in mind that tuition rates will follow the Tuition rate policy set by Student Accounts. Payroll will calculate your tax liability based on the rates set forth by Student Accounts.
Where can I go for questions on the Tuition Remission Benefits Policy?
Please go to the HR Compensation and Benefits website to review the summary on Tuition Remission. You must request remission for each semester using the on-line tools provided.
Where can I go for questions on tax withholding?
Visit the IRS website or contact a tax accountant. Each taxpayer should seek advice from their own independent tax adviser, based on the taxpayer's particular circumstances. The Payroll Department is unable to provide tax advice.
Additional Questions? Suggestions? Concerns?
The Payroll Department is here to help! Please contact us via email the Payroll Department or call at (914) 923-2898 and we’ll happily answer your questions.