Need Quick Reimbursement Help
My adoption reimbursement saga continues....
Just got a call from HR that my reimbursement was pulled from the system this week. Apparently, the policy (that I still haven't seen) says we get reimbursed for $3,500. HR interpreted that to me net. So when they submitted for my payment to Accoutning they grossed it up so that I net $3,500. Accntg told them that was wrong and it has now been taken up the chain of command for a decision to be made. They asked me how I interpreted it.
Can anyone help? What is the norm?
To me a reimbursement would be similar to a car allowance which is paid 1:1, not taxed. But when they told me it was going in my paycheck I knew it was getting taxed and just accepted. At least now HR is fighting for me without me even asking for it. They have asked me for any guidance on what is usual in companies.
Re: Need Quick Reimbursement Help
My understanding is that this is a reimbursement for expenses and thus not taxed. You should just get $3500 and be done.
I don't have adoption reimbursement through work, but I do have education reimbursement and that's how it's handled. I show receipts and get a separate check for the full amount.
This website might be helpful. https://www.allbusiness.com/finance/3591178-1.html
I don't think they can take out income tax, but ss, medicaid, and unemployment tax can be taken out depending on state laws. Make sure you understand if this and/or the tax credit will provide you the max benefit.
I would interpret it this way.
This. I received a check for the amount that I submitted for reimbersement- same as I would for company expenses or for an educational reimbersement (although I did have to pay taxes on the ed one above a certain limit). Good luck, I had to fight for my reimbersement as well because it seemed to never have been used before! (and I was laid off!) Good luck I hope they work things out well for you!
What everyone else said.
If they want to take taxes out, they SHOULD gross it up. Our policy says that it will be grossed up and I will receive $2,500.
I just read my company's documents and my benefit is considered taxable income by my company - and they will take out normal deductions.
However, the gov't does not consider this taxable - so you will not need to claim it as income. Per the IRS.gov site:
"For 2009, the maximum adoption credit has increased to $12,150. Also, the maximum exclusion from income for benefits under your employer's adoption assistance program has increased to $12,150. These amounts are phased out if your modified AGI is between $182,180 and $222,180. You cannot claim the credit or exclusion if your modified AGI is $222,180 or more."
So, your company can treat it as taxable now, but you'll get the taxed portion back when you file.