1098 T forms , employer reimbursement and timing differennces lifetime learning credit

[Liesal]

Taxpayer received following forms and amounts graduate school

2021 1098 t tuition 6522

 w2 tx free reimbursement  4314

2022 1098 t 4416

 w2 tax free reimbursement 5250

Looks like i have timing differences in that taxpayer is only reimbursed after completing course with achieved grade.  NO other boxes are checked on 1098T. 

  at best  total tuition 10938

total tax free 10500 but only 9564 shown on w2.?

How do i enter on these two years to not overclaim the llc knowing what i know now in march 2023

2021

tuition 6522 less w2 tax free of 4314 or do i use max 5250 as it aqppears w2 for 2022 has tax free of 5250 but only 4416 education expenses.

How do i adjust the education expense paid shown on 1098 t to not overclaim the credit based on what i know happened in 2021 and 2022.   AT most total tuition 4416 +6522 less max tax free assistance -5250-5250. netting a total education cost a credit maybe claimed for.?

[itonewbie]

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@Liesal wrote:

 ...total tax free 10500 but only 9564 shown on w2.?

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Not sure what you meant to say here.  How is $10,500 relevant?  That's only the maximum amount of annual exclusion x 2 years.  Based on your information, the actual amounts reimbursed were $4,314 wrt 2021 tuition and $5,250 for 2022 tuition.

Your post seems to imply that the employer paid a total of $9,564 ($4,314 + $5,250) through the EAP in 2023?  Are you saying this amount is reported on the W-2?  If these were treated as tax free, there may be a notation in the compensation breakdown but it shouldn't show up on the W-2.

If it's all paid in 2023, shouldn't $4,314, which is above the annual limit, be included in Box 1?  Unlike §25A, §127 has no timing rules and the annual limit is determined simply by reference to "education assistance furnished to an individual during a calendar year" rather than any other time periods such as academic year, etc.  Below is an excerpt from the IRC [emphasis added]:

127(a)(2)$5,250 maximum exclusion.—

If, but for this paragraph, this section would exclude from gross income more than $5,250 of educational assistance furnished to an individual during a calendar year, this section shall apply only to the first $5,250 of such assistance so furnished.

In any case, where EAP reimbursements are made after the close of the tax year, Pub 970 provides guidance on how such reimbursements should be treated, depending on whether these are received before or after the return is filed.  Given what you know now, the 2022 EAP reimbursement, presumably made in 2023, would be used to offset your client's 2022 education expenses.  Question is: How is it possible that your client received a reimbursement of $5,250 for having paid $4,416.

I may be missing a beat but things don't seem to be adding up here...

[itonewbie]

Here's a link to the Pub: https://www.irs.gov/publications/p970#en_US_2022_publink1000204352

[Liesal]

No in 2021 w2 lists tax free assistance as 4314

2022 w2 lists tax free asistance5250

He takes class, gets grade then gets reimbursed.

I am amending 2021 as i claimed llc not knowing he was reimbursed..( did not have detail behind w2 that i have in 2022)

or in other words the 2021 109 t showed tuition costs more than he was reimbursed  but in 2022 opposite occurs again i assume due to timing. 

  But based on w2 tax free annotations 4314 for 2021 and 5250 for for 2022 perhaps i have more of a credit to claim for 2021 than i think. 

so total tuition for both years 6522 in 2021 plus 4416 in 2022  10938 

tax free per w2  4314 in 2021 plus 5250 in 2022 

So my first inclination is to amend 2021 for overcliamed llc and report 6522 expenses less 4314 tax free but then it looks like 2022 over reimbursed. 

so my issue is what do i claim for 2021 amended llc.