Possible expiration of payroll tax cut, tuition remission tax break
A number of tax provisions are currently undergoing debate in Congress, which may have tax implications for Marquette employees. The two most timely items are the expiration of the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630) and the expiration of Section 127 of the Internal Revenue Code, which governs how tuition remission income is taxed.
The Middle Class Tax Relief and Job Creation act, also known as the “payroll tax cut,” reduced the employee’s share of the Social Security payroll tax by two percent (from 6.2 percent to 4.2 percent) for calendar years 2011 and 2012. It is set to expire Dec. 31, 2012, unless Congress and the President can agree on an extension, and has the potential to impact nearly 160 million workers across America.
The Office of the Comptroller has developed an online payroll tax calculator that will help employees estimate by how much the possible expiration of the payroll tax cut would increase their payroll deduction for social security tax.
Tuition Remission Implications
Section 127, a temporary addition to the Internal Revenue Code that has been extended multiple times since its first expiration at the end of 1983, allows employees to exclude from income up to $5,250 per year in assistance for educational courses at the graduate level.
If Section 127 is not renewed prior to its expiration on Dec. 31, 2012, employees taking advantage of Marquette’s tuition remission benefit for graduate level courses will be taxed on the full dollar amount of tuition remission funds beginning in January 2013. Taxable tuition remission amounts are divided evenly over the pay periods of the applicable academic term and added to an employee’s paycheck as Imputed Income. Employees currently utilizing Marquette’s tuition remission benefit for graduate level courses were sent an email explaining the impact of the potential expiration of Section 127 in greater detail.
Human Resources and the Office of the Comptroller are following the Congressional discussions regarding these tax decisions carefully, and will continue to keep employees updated on possible tax implications.
The Payroll Department is responsible for employee payments, tax withholding, payroll deductions, preparing W-2 and 1042S tax forms, and other activities required to generate payroll payments to university employees.
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Joyce E. Pogorzelski
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