Employer-Provided Educational Assistance – UF Employee Education Program (EEP)
Employees participating in the university’s written education benefit program are afforded a tax-free benefit up to the annual IRS limit. Benefits in excess of this limit are subject to employment taxation.
Reason for Directive
The purpose of this directive is to comply with Internal Revenue Code (IRC) section 127 regarding taxation of employee educational assistance benefits and to exclude from the employee’s income up to $5,250 in tuition waiver benefits received.
Who must comply?
All university departments.
- Employees participating in the EEP receive a tuition waiver for up to six credit hours of instruction per semester. The education need not be job-related
- In the fall semester, Payroll Services obtains data from the Bursar’s office regarding EEP tuition benefits for the Spring, Summer, and Fall terms and determines the taxable portions in excess of the annual IRS limit
- Employees with a taxable portion are notified by email of the taxable amount and the paycheck(s) on which the corresponding taxes will be assessed. (Payroll Services divides the taxable portion over two paychecks if the expected tax impact is a significant portion (20% or more) of the employee’s typical net pay)
- Payroll Services records the taxable portion as Miscellaneous Taxable Income (MTI) on the employee’s paycheck payline, and the amount is assessed employment taxes along with the employee’s regular earnings. Twenty-six tax periods are used, so federal withholding is calculated as if the benefit was earned throughout the calendar year. In most cases, this results in little or no federal withholding specific to the MTI. Applicable Social Security and Medicare taxes are automatically assessed by the payroll system
The term “educational assistance” means— (A)the payment, by an employer, of expenses incurred by or on behalf of an employee for education of the employee (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment), and (B)the provision, by an employer, of courses of instruction for such employee (including books, supplies, and equipment.)
05/01/2020: reviewed content
Payroll Services: (352) 392-1231
Tax Services: (352) 294-7266