AU tuition remission error impacts 150 employees
Some owe taxes from 2004-2007, university promises full reimbursement
AU will reimburse employees for any taxes they may owe as a result of an error in processing tuition remission that affected approximately 150 employees' spouses who attended AU between 2004 and 2007, according to Executive Director of Human Resources Beth Muha.
AU incorrectly processed the value of taxable tuition for employees' spouses attending the university as undergraduate and graduate students, Muha said. The students affected by the error were divided almost equally between the graduate and undergraduate levels.
"The policy was unclear, and the processing was incorrect," she said.
All the tuition remission benefits given to employees whose spouses were enrolled in graduate programs should have been taxed, Muha said. Instead, it was only taxed after the first $5,250 due to an administrative error.
For these employees, the university will pay any fees related to the error and will refund the related taxes, according to Muha.
"We're really trying to do the responsible thing because it's not their fault that this administrative mistake was made," she said.
However, the university taxed the tuition remission benefits given to employees whose spouses were enrolled in undergraduate programs after the first $5,250 when they should not have been taxed at all, Muha said. These employees will receive money back.
This error occurred because AU misinterpreted the tax code, Muha said. The university was using section 127 of the U.S. Internal Revenue Code, which deals with tuition remission benefits for all employers. It should have also used section 117, which deals with universities.
The Human Resources department discovered the error at the end of 2007 and spent a month looking into the problem before notifying employees on Jan. 31, Muha said. The university had not previously noticed the error, even during past tax audits.
The university decided not to reimburse the taxes of former employees, who account for one-third of those affected, according to Muha.
Attempts by The Eagle to talk to employees who were affected by the error were unsuccessful.
The reimbursement will become taxable income for this year, she said.
"We're taking it very seriously - we're doing all that we can," Muha said.
Human Resources set up a designated phone line for the problem at 202-885-3400 and an e-mail address - TRamend@american.edu.