So my wife is doing an MBA and her company pays for school. Recently they changed their tax withholding procedures. Before she was able to claim it was work related so no taxes were withheld. Now the company claims that is no longer the case and they must withhold taxes on anything over the 5250 and it gets spread over 7 pay periods.
The issue is that they are just now starting to deduct on the amount over the 5250. And it will span into next year.
So on taxes for 2009, do we just treat the education over the 5250 that they are deducting on as school expenses paid by us this year. Or do we have to only include the proportion that has had taxes withheld from it this year.
Just for numbers sake.
Total education this year paid by company = $10250 Total tax free = $5250 Total to be taxed = $5000 Taxes spread over 7 pay periods of 2 weeks each. So taxes on ~$715 a pay period. Taxes taken out this year to just be in December So ~$1430 this year. Remainder taken out next year.
So on 2009 taxes to we have education expenses of $5000 or just the $1430 since that what was taxed, then next year we deduct the remainder?