Is education expense money taxable income?

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xry222

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Hi all,

I went to a conference. I was reimbursed for expenses (hotel, conference fee, etc) using mostly the yearly education expense money we get as residents and partially from the once a year conference money we get if we're presenting a topic. I had paid for all of it with my credit card, and gave my program the receipts. My residency program apparently reported the entire amount that was reimbursed as taxable income. Now I owe the IRS back taxes for that year. Obviously I did not report that as taxable income because at no other point have I had to report it as taxable income (including a different year for the SAME program). My question is- is that truly taxable income? Does it vary by GME program or state? Was this an error by my program?

I asked the other residents if any of their educational money use was counted as taxable income and they said it was not. So, either they are all lying (doubtful) or the program decided my money would be taxable and their money would not (which would be very odd behavior for a residency program). I'm supposed to reply very soon to the IRS about it, and I would appreciate knowing if any other programs out there are reporting reimbursed education expenses of their residents as taxable income. Thank you!

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Should not be taxed. Talk to your hospital / university HR department. They can submit an amended tax form for you. You will still need to submit paperwork appealing the audit to the IRS. But once the hospital files an amended form it should be straight forward.


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Agree with above. This was probably just an honest mistake. Something similar happened to me (twice) before I noticed. . .

At an old job a had a certain amount for educational expenses/CME. I went to a conference and paid for everything with my credit card and submitted it to the hospital. They paid me back in my next paycheck but forgot to put it in the correct no tax category and instead basically just put it in with my normal pay, for which I of course have to pay income tax (but I paid my credit card from my savings account, which is of course post-income tax), so I literally paid income tax twice on the same dollar (35-40+% then again!). It was simple to correct but then I realized they did the same thing the last time ... that was in the previous tax year and would have been a pain but it was just for a book so I didn't bother but even though I direct deposit I still review my entire paycheck every month!
 
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Thank you both for your reply. My residency program refuses to change the reported income. They stated that I should itemize the expenses and deduct them from my final income in that manner. I do a standard deduction. I asked them how I could itemize if I do a standard deduction and the financial person literally, LITERALLY, just wrote: "I'm sorry I can't help you." Basically, my beloved and wonderful residency program, during which I lived pay check to pay check and also in progressive debt, just screwed me over. At this point, it's not about the money, but the principle that a residency program would be so cavalier and disinterested in something that to someone living paycheck to paycheck actually means a lot. Furthermore, why should a person who doesn't itemize and elects a standard deduction, get 30% less educational fund than a resident who does? I have thought about this over and over and over again, and I absolutely cannot figure out why a residency program would do this to their residents. I keep thinking about how hard I worked for those attendings, and why they would do some thing that no other residency program I know of does. It's so nonsensical. Why should a program purposely make things difficult for their residents when no other residency (again that I know of?) does it. It's one thing if it were standard across all residency programs that a person taking a standard deduction gets penalized on their education fund; it's a whole other thing when you are purposely putting your residents at a disadvantage. Of course, I have thought about many things a program does to residents that is beyond my little tiny brain's ability to understand. The world is full of mysteries.
 
It's not a fun day when you realize your residency program does not care one bit about you as a person. Happens to all of us.
 
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This happened to me as well last year, but not my first year of residency. My co-residents and I went to our financial department who said we "got the money reimbursed faster" by going one particular route. The year before they used the other reimbursement route which did not result in getting a 1099. End result about $150-200 less on tax returns. Not cool. I usually use my ABR, question bank, ASTRO, etc for good credit card points since they'll be reimbursed but now I'm second guessing.
 
Bummer. Might as well name the residency program. Maybe you could call your local TV news station and get the "Who's Looking Out For You?" reporter to do a nice exposé on these so-and-so's. :)
 
Sorry to ask this again -- but did you go to the hospital HR department ? Every institution runs things differently but it is hard to imagine that your department does its own payroll ? Or how about the GME office ? Plain and simple it is not taxable income (and there is no incentive for it to be - and actually it is a disincentive for hospital to pay SSDI and FICA on this).


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Sorry to ask this again -- but did you go to the hospital HR department ? Every institution runs things differently but it is hard to imagine that your department does its own payroll ? Or how about the GME office ? Plain and simple it is not taxable income (and there is no incentive for it to be - and actually it is a disincentive for hospital to pay SSDI and FICA on this).


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I'm with RadiaterMike...You should go to the GME office of the institution and ask questions. I am not a tax lawyer but as Mike points out there are many reasons that this should not be treated as income.
 
I asked the GME and they immediately deferred to our particular department. Human Resources will do the same thing.

I wrote a long e-mail to our departmental financial person, and she literally told me it was federal law, not their particular policy, and said "Sorry." It's not an enormous amount, but I do keep thinking about how difficult my financial situation is in residency and how not difficult the financial situation of residents who bought houses is (and therefore had a good reason to itemize- property tax and mortgage interest; I realize things can be hard for house owners too but at least they had enough $ to buy that initial investment), so to specifically do things in a way that makes it harder for your less fortunate (less fortunate because there was NO way I could have afforded buying property and, thus, itemizing would have increased my taxes) while making it simple for your wealthier resident to avoid getting taxed for education expenses/conference (a conference where I had a poster). I get it- we live in a tough world and the rich always win out, and I'm at the end of the day in rad onc, but it is extremely frustrating. I simply don't understand why they just can't do it the way 90% of other residency programs do it.
 
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Do you have a friend or family member who is a lawyer? A letter on legal letterhead might quickly change their mind.

Sadly, I am not surprised at all to see how this turned out. Residents have no bargaining power at all. The program has nothing to gain by helping you, therefore they won't. It's really sad. If you were a secretary who was currently employeed by the program and came to them with a similar issue, it would probably be resolved immediately. Their attitude is "just be thankful we let you graduate and stop bothering us."
 
You are employed by the hospital, not your department or the GME. Both your department and GME seem clueless and lazy anyways. I would ask HR to straighten it out for you. That is their job. I'm no lawyer or CPA but from the last paragraph of this blog it seems like they are violating IRS regulations (as I would assume the hospital has an "accountable plan"). If you have no lawyer friend, perhaps the threat of legal action would also motivate someone to put minimal effort into generating an amended tax form for you.

https://justworks.com/blog/expenses-101-expense-reimbursements-taxable-income

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I'm no tax guy, but I did sleep at a Holiday Inn.

From the IRS - Tax Topic 514 - Employee Business Expenses
Tax Topics - Topic 514 Employee Business Expenses

If your employer reimbursed you or gave you an advance or allowance for your employee business expenses that's treated as paid under an accountable plan, the payment shouldn't appear as income on your Form W-2 (PDF), Wage and Tax Statement. You don't include the payment in your income, and you may not deduct any of the reimbursed amounts.

To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules:

  1. You must have paid or incurred expenses that are deductible while performing services as an employee
  2. You must adequately account to your employer for these expenses within a reasonable time period, and
  3. You must return any excess reimbursement or allowance within a reasonable time period
So it sounds like items 1-3 are met, and attending a conference *is* an allowed business expense.

You should read pub 453 under Reimbursements (p. 30, Chapter 6), and understand "Accountable Plans" and "Nonaccountable plans" (p. 33). It sounds like the arrangement with your residency program satisfies the rules of an Accountable Plan, but for some reason they are treating it as a Nonaccountable Plan. You should ask for an explanation as to why.

If it is truly an Accountable Plan, your reimbursement should not be included as income. In that case, they made a mistake on your W2, and should provide you with a corrected W2. (*see pub 463 - p. 30 where it says "TIP").

If for some reason it's a Nonaccountable Plan, then you can only itemize it as an expense and need to fill out Form 2106. But that won't help you since you're taking the Standard Deduction.

I suggest you go straight to the department's finance person or the institution's accountant and ask for an explanation. Say that you believe the reimbursement you received is not taxable income and should NOT have been reported on your W2 and ask for a corrected W2. Do this in writing.

If this does not work, you need to receive an explanation why they are not treating the reimbursement as an Accountable Plan.

If this is not successful, then you may need to lodge a complaint with the state Attorney General's office and the IRS. See here.

Good luck.
 
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Everything Brim said except go to HR for the hospital --- the hospital writes your checks not your department. HR can then coordinate with your department if necessary.


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Hey thank you everyone! I will call HR tomorrow and see what the say. I already went to the our department's accountant and she said, "Too bad, tough luck, life sucks, federal policy." I'm 99% sure HR will defer to our department accountant. So, I will definitely be filing a complaint with the State Attorney General's office and the IRS. In my response to the IRS, I already asked them to look into the department's policy but I was not aware we could file official complaints.

As for getting a personal lawyer, I would be burning all future bridges with the department for recommendations. Although, as I've been frustrated with this, they may have already gotten annoyed and I honestly don't think I would even be losing much in terms of bridges going down. Plus, if I do file complaints with the IRS, they probably will also retaliate. It's a department that cares extremely little for residents (I know, they are all like that) but in this department there is an extremely toxic and cruel attending that tortures residents (20-30% of them- totally unrelated to ability or intelligence- he just decides prior to them starting his rotation that he hates them, and then makes their life Hell for his own entertainment; the residents he does this too don't have anything in common with each other in any way- sex, religion, race, ethnicity, passing boards, test scores, etc). He does it in full view of patients (to the point where patients comment on the behavior) and staff, including other attendings, and the department happily looks the other way. If you bring up the behavior to the program, they "talk" to him, then say, "You misinterpreted his behavior. He was trying to teach you." His behavior and the surrounding apathy makes me question humanity and human decency. This is obviously completely unrelated to the tax thing (or at least only tangentially related in the callousness towards residents); I'm just lamenting the cruel position residents are put in with zero recourse and protection, and always being concerned about future recommendations. It's a sad world filled with sad people. If there is one thing in life I would wish for, it would be accountability of residency programs for resident well being but I honestly do not foresee that happening in my lifetime. The only way that could happen is if a Congress person's child committed suicide in residency because of abuse and he/she decided to make it his/her cause to literally get the government involved and enact laws of accountability (that's why the govn pays for kidney transplants; some congress person's daughter or son needed it). That's a long shot- it will never happen (nor would I want a suicide to be the inciting change). If you truly sat down and thought about it, utter hopelessness and despair would over take you. That's why it's best to numb your mind with constant activity. The majority of us go into residency to help people, so to be treated so poorly in return just doesn't make sense.
 
Hey thank you everyone! I will call HR tomorrow and see what the say. I already went to the our department's accountant and she said, "Too bad, tough luck, life sucks, federal policy." I'm 99% sure HR will defer to our department accountant. So, I will definitely be filing a complaint with the State Attorney General's office and the IRS. In my response to the IRS, I already asked them to look into the department's policy but I was not aware we could file official complaints.

As for getting a personal lawyer, I would be burning all future bridges with the department for recommendations. Although, as I've been frustrated with this, they may have already gotten annoyed and I honestly don't think I would even be losing much in terms of bridges going down. Plus, if I do file complaints with the IRS, they probably will also retaliate. It's a department that cares extremely little for residents (I know, they are all like that) but in this department there is an extremely toxic and cruel attending that tortures residents (20-30% of them- totally unrelated to ability or intelligence- he just decides prior to them starting his rotation that he hates them, and then makes their life Hell for his own entertainment; the residents he does this too don't have anything in common with each other in any way- sex, religion, race, ethnicity, passing boards, test scores, etc). He does it in full view of patients (to the point where patients comment on the behavior) and staff, including other attendings, and the department happily looks the other way. If you bring up the behavior to the program, they "talk" to him, then say, "You misinterpreted his behavior. He was trying to teach you." His behavior and the surrounding apathy makes me question humanity and human decency. This is obviously completely unrelated to the tax thing (or at least only tangentially related in the callousness towards residents); I'm just lamenting the cruel position residents are put in with zero recourse and protection, and always being concerned about future recommendations. It's a sad world filled with sad people. If there is one thing in life I would wish for, it would be accountability of residency programs for resident well being but I honestly do not foresee that happening in my lifetime. The only way that could happen is if a Congress person's child committed suicide in residency because of abuse and he/she decided to make it his/her cause to literally get the government involved and enact laws of accountability (that's why the govn pays for kidney transplants; some congress person's daughter or son needed it). That's a long shot- it will never happen (nor would I want a suicide to be the inciting change). If you truly sat down and thought about it, utter hopelessness and despair would over take you. That's why it's best to numb your mind with constant activity. The majority of us go into residency to help people, so to be treated so poorly in return just doesn't make sense.

Yeesh. Sucks, man. I'd consider name dropping the residency if you really feel that way, but everyone's always paranoid it's going to ruin their future employment chances.
 
Hey thank you everyone! I will call HR tomorrow and see what the say. I already went to the our department's accountant and she said, "Too bad, tough luck, life sucks, federal policy." I'm 99% sure HR will defer to our department accountant. So, I will definitely be filing a complaint with the State Attorney General's office and the IRS. In my response to the IRS, I already asked them to look into the department's policy but I was not aware we could file official complaints.

As for getting a personal lawyer, I would be burning all future bridges with the department for recommendations. Although, as I've been frustrated with this, they may have already gotten annoyed and I honestly don't think I would even be losing much in terms of bridges going down. Plus, if I do file complaints with the IRS, they probably will also retaliate. It's a department that cares extremely little for residents (I know, they are all like that) but in this department there is an extremely toxic and cruel attending that tortures residents (20-30% of them- totally unrelated to ability or intelligence- he just decides prior to them starting his rotation that he hates them, and then makes their life Hell for his own entertainment; the residents he does this too don't have anything in common with each other in any way- sex, religion, race, ethnicity, passing boards, test scores, etc). He does it in full view of patients (to the point where patients comment on the behavior) and staff, including other attendings, and the department happily looks the other way. If you bring up the behavior to the program, they "talk" to him, then say, "You misinterpreted his behavior. He was trying to teach you." His behavior and the surrounding apathy makes me question humanity and human decency. This is obviously completely unrelated to the tax thing (or at least only tangentially related in the callousness towards residents); I'm just lamenting the cruel position residents are put in with zero recourse and protection, and always being concerned about future recommendations. It's a sad world filled with sad people. If there is one thing in life I would wish for, it would be accountability of residency programs for resident well being but I honestly do not foresee that happening in my lifetime. The only way that could happen is if a Congress person's child committed suicide in residency because of abuse and he/she decided to make it his/her cause to literally get the government involved and enact laws of accountability (that's why the govn pays for kidney transplants; some congress person's daughter or son needed it). That's a long shot- it will never happen (nor would I want a suicide to be the inciting change). If you truly sat down and thought about it, utter hopelessness and despair would over take you. That's why it's best to numb your mind with constant activity. The majority of us go into residency to help people, so to be treated so poorly in return just doesn't make sense.
If you're going into private practice, recommendations from attendings in your program mean precisely nothing.
 
Man what a terrible situation. Do the attendings get reimbursed for conference travel? Is reported as income for them as well? I certainly wouldn't be happy if I had to pay tax on my conference reimbursement. I ask because if the attendings realize they are being overtaxed changes may happen; if they are not having it reported then I would be curious to hear what the rationale for the difference is.

Strange that your accountant can be so ignorant of the tax code. They are having to pay more doing it this way because of payroll / FICA tax.

Regarding your toxic program, I haven't paid attention to if there are still threads on residency reviews that are anonymous but if there are at some point you may wish to share your feedback.
 
What a fantastic program!!! Here's to hoping you'll be graduating relatively soon.

Strange that your accountant can be so ignorant of the tax code. They are having to pay more doing it this way because of payroll / FICA tax.
I would think that his reimbursement is excluded from Medicare and Social Security tax.

Out of curiosity, was there anything listed in Box 12 (other than your retirement plan) or Box 14 of your W2?
 
Regarding your toxic program, I haven't paid attention to if there are still threads on residency reviews that are anonymous but if there are at some point you may wish to share your feedback.

FWIW the OP never said that this is a radiation oncology program. I would be surprised if it is (since most programs send residents to ASTRO and other meetings without issue, and if it were me, I'd post the question on a board that nobody from my program would read).
 
It is a radiation oncology program. I imagine mine is not the only toxic program nor have I given specific details of the program. If in fact we are the only toxic program, then we have terrible miserable horrible cruel luck but on the flip side, it would improve my perception of humanity and radiation oncology at large. And we'd also be unlucky if there is only one radiation oncology program with such a tax problem. (Also asking a question about taxes should not be a cause for anger; filing complaints with the IRS or involving a lawyer however would anger people). I don't think I can further investigate this tax thing. I've reached a wall. If we don't have a presentation for ASTRO, we have to use either our own money or education money. If we do have a presentation, it's reimbursed to an extent, but not necessarily the entire thing. I have no idea how the attendings are reimbursed and no one is interested in answering my question.
 
What a fantastic program!!! Here's to hoping you'll be graduating relatively soon.


I would think that his reimbursement is excluded from Medicare and Social Security tax.

Out of curiosity, was there anything listed in Box 12 (other than your retirement plan) or Box 14 of your W2?
It was reported as supplemental income on a 1099- which, I looked online, is apparently how some contractors get their income reported. I was never aware I was a contractor of any sort. I always thought I was a hospital employee...but again, this is now a lost cause unless I do actually want to hire a lawyer.
 
In the case that it's 1099 income you're fine.

Report the income on Schedule C as self-employment income and deduct all the expenses you paid with that money as business expenses on the same form. You will owe no tax and this is perfectly legal.

You can still take the standard deduction on your W2 wages.
 
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I'm surprised HR didn't help. Sorry they are so unhelpful. I hope your program is the exception. When this happened to me an amended form was filed (for $0) from the hospital. Neuronix's suggestion is a good one. You will need to file an amended tax form with a letter explaining the situation. Might need receipts of some sort. If you don't have those receipts anymore documentation that they were submitted for reimbursement might suffice (I don't know). If you used TurboTax that program can help you with this. You might need to pay a bit extra to upgrade to the package with the self employment stuff.


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I know a bit about this because I've received 1099 forms for moonlighting and deducted business expenses on that. There are other tricks you can do--such as the solo 401(k)--which are a little more complicated but I think well within the reach of the DIYer.

It's easy to claim the deductions. Keep receipts in case of audit. TurboTax is expensive. You can use freefile programs at that income that will include the self-employment packages.
 
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I know a bit about this because I've received 1099 forms for moonlighting and deducted business expenses on that. There are other tricks you can do--such as the solo 401(k)--which are a little more complicated but I think well within the reach of the DIYer.

It's easy to claim the deductions. Keep receipts in case of audit. TurboTax is expensive. You can use freefile programs at that income that will include the self-employment packages.

Thank you so much Neuronix! This might actually work. I have the receipts of all of my educational expenses as well as the hotel and airfare, so that shouldn't be a problem. So sad that my residency program couldn't have easily shared that information with me. Oh but silly me! Of course, they don't care at all about my existence. So much angst and time wasting could have easily been avoided.
 
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