Educational assistance refunds.
Employers and employees who participated in employer-provided educational assistance plans in 1995 or 1996 are entitled to refunds. Before 1995, Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. section 127 provided an employee with an annual exclusion Annual exclusion
A tax rule allowing the deduction of certain income from taxation. from income of up to $5,250 for educational assistance benefits (EABs). Under the Small Business Job Protection Act of 1996, this exclusion was reinstated and made retroactive to January 1, 1995.
Employees who previously paid taxes on EABs now can get refunds for federal income taxes paid in 1995 and Social Security and Medicare taxes paid in 1995 and 1996. Employers can obtain refunds for Social Security, Medicare and unemployment taxes.
The Internal Revenue Service has made it easier to get these refunds. IlKS information release 96-36 said employees who paid income taxes in 1995 on excludable EABs can receive their refunds simply by filing Form 1040X, Amended U.S. Individual Income Tax Return, and attaching Forth W-2c, Statement of Corrected Income and Tax Amounts, showing the corrected wages for 1995. To expedite the process, taxpayers are advised to print "IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel. 127" in the top margin of form 1040X. Employees who qualify for the earned income credit Earned Income Credit
A tax credit for low-income workers, even if no income tax was withheld from the worker's pay.
This credit varies with family size, income and the number of children. should read IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. publication no. 596.
For both 1995 and 1996, employees will receive their Social Security and Medicare tax refunds from the employers that provided the educational assistance. Employees whose 1995 wages (excluding educational assistance) exceeded $61,200, or $62,700 in 1996, are entitled only to Medicare tax refunds. Employees who are unable to get their tax refunds from their employers must file Form 843, Claim for Refund and Request for Abatement.
Employers may claim refunds either by reducing their federal tax deposits or filing form 843. They must report these adjustments on Form 941, Employers Quarterly Federal Tax Return, and Form 941c, Supporting Statement to Correct Information.
Observation: Retirement plans and individual retirement accounts should include EABs in employees' 1995 income. This will prevent adjustments in the plans from the reinstatement of the exclusion. In addition, the reduction in adjusted gross income from the retroactive exclusion may allow some taxpayers to treat previously nondeductible 1995 IRA Ira, in the Bible
Ira (ī`rə), in the Bible.
1 Chief officer of David.
3 Two of David's guard.
IRA. contributions as deductible. To do this, the corrected nondeductible contribution amount should be added to Form 8606, Non-deductible IRA Contributions, IRA Basis and Nontaxable IRA Distributions, and attached to form 1040X.
--Michael Lynch, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , Esq., associate professor of accounting at Bryant college, Smithfield, Rhode Island Smithfield is a town in Providence County, Rhode Island, United States. It includes the historic villages of Esmond, Georgiaville, Mountaindale, Hanton City and Greenville. The population was 20,613 at the 2000 census. .