Employer-Provided Educational Assistance If you receive educational assistance benefits from your employerunder an educational assistance program, you can exclude up to $5,250of those benefits each year. This means your employer should notinclude the benefits with your wages, tips, and other compensationshown in box 1 of your Form W-2. This also means that you do nothave to include the benefits on your income tax return. Caution: You must reduce your deductible educational expenses bythe amount of any tax-free educational assistance benefits youreceived for those expenses. Educational assistance program.To qualify as an educational assistance program, the plan must bewritten and must meet certain other requirements. Your employer cantell you whether there is a qualified program where you work. Educational assistance.Tax-free educational assistance benefits include payments fortuition, fees and similar expenses, books, supplies, and equipment.The payments must be for undergraduate-level courses that begin beforeJune 1, 2000. The payments do not have to be for work-related courses. Educational assistance benefits do not include paymentsfor the following items. Meals, lodging, transportation, or tools or supplies (otherthan textbooks) that you can keep after completing the course ofinstruction. Education involving sports, games, or hobbies unless theeducation has a reasonable relationship to the business of youremployer, or is required as part of a degree program. Graduate-level courses that are normally taken under aprogram leading to a law, business, medical, or other advancedacademic or professional degree. Benefit over $5,250.If your employer gives you more than $5,250 of educationalassistance benefits during the year, the amount over $5,250 isgenerally taxable. Your employer should include the taxable amount inyour wages (box 1 of your Form W-2). However, if the payments also qualify as a working condition fringebenefit, your employer can exclude all of the payments from yourwages. A working condition fringe benefit is a benefit which, had youpaid for it, you could deduct as an employee business expense. Possible Refund The $5,250 annual exclusion for employer-provided educationalassistance benefits expired for tax years beginning after 1994.However, the exclusion was reinstated retroactively and extended tobenefits received for courses beginning before June 1, 2000.Therefore, you may be entitled to a refund of any social security andMedicare taxes you paid on excludable benefits for 1996 or 1997. You are entitled to a refund of any social security and Medicaretaxes withheld by your employer on excludable benefits in 1996 and1997. Ask your employer to refund these taxes. If you are not able to get a refund of these taxes from youremployer, you can file Form 843, Claim for Refund and Request forAbatement, with the IRS. To speed up processing of the form,print "IRC 127" in the top margin. Attach a statement from youremployer listing any taxes the employer refunded to you and any taxesthe employer claimed as a refund, or was authorized by you to claim asa refund. If you cannot get this statement, you must make the samestatement (to the best of your knowledge and belief) and explain whyyou could not get it from your employer.