Retraining Package - $2500 Tax Filing Question

[retire2020]

As part of my layoff package, I was offered $2500 for retraining assistance. Which meant I can take any course/s worth $2500, pay first and then submit paper work to get that amount reimbursed. My company will then pay me and issue me 1099 for that $2500. Now questions are:

1) Do I need to report that amount on 1040?
2) If yes then where do I report that amount(1040 line no?)
3) Where do I claim that amount for Credit(1040 line no?)

Basically, I think it should be a wash as I pre-paid for education and then my former employer paid back. Hope this does not generate more tax for me.

I'm trying to estimate obamacare magi for subsidies so above info. will play a crucial role as I'm planning to be as near as possible to 400% FPL. If its part of Itemized deduction then it'll not help me towards magi but if it can be claimed as credit on line 34 - Tuition and Fees then it shall be a wash. But then I read that 'Tuition and Fee' deduction was not renewed by congress for 2017 as per google search. Please let me know your views.

 

[Senator]

As part of my layoff package, I was offered $2500 for retraining assistance. Which meant I can take any course/s worth $2500, pay first and then submit paper work to get that amount reimbursed. My company will then pay me and issue me 1099 for that $2500. Now questions are:

1) Do I need to report that amount on 1040?
2) If yes then where do I report that amount(1040 line no?)
3) Where do I claim that amount for Credit(1040 line no?)

Basically, I think it should be a wash as I pre-paid for education and then my former employer paid back. Hope this does not generate more tax for me.

I'm trying to estimate obamacare magi for subsidies so above info. will play a crucial role as I'm planning to be as near as possible to 400% FPL. If its part of Itemized deduction then it'll not help me towards magi but if it can be claimed as credit on line 34 - Tuition and Fees then it shall be a wash. But then I read that 'Tuition and Fee' deduction was not renewed by congress for 2017 as per google search. Please let me know your views.

You report the 1099 as income. There is a line items for any 1099s. Maybe you can then deduct the cost of the training against the $2500 on a schedule A.

 

[kaneohe]

from Pub 17:

Outplacement services. If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income.
However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040).

 

[retire2020]

Thanks Senator. In that case it will not help to reduce AGI.

kaneohe: Nothing to do with outplacement service or reduced severance. As mentioned earlier, its $2500 I can use towards any training

 

[kaneohe]

Thanks Senator. In that case it will not help to reduce AGI.

kaneohe: Nothing to do with outplacement service or reduced severance. As mentioned earlier, its $2500 I can use towards any training

......but they are similar........you are getting something in addition to severance.......so you will pay taxes on this addition.....if you get a 1099-MISC, you will enter it on line 21 of 1040 The deduction is taken on Sch A in the
misc deductions section (perhaps line23) subject to 2% of AGI floor.

 

[youbet]

The amount you are reimbursed will appear on a 1099 and TurboTax or other tax program will put it on the correct line. It will be income.

You will be able to deduct educational expenses as an misc deduction if the training does NOT qualify you for a new profession. (Go to the IRS site for details.) There might be other factors in your particular case such as whether your job was eliminated due to off-shoring, etc.

 

[retire2020]

Spoke with my accountant and he said I will not be able to write that off as misc expense on Sch A as first two percent of agi is excluded. Which is my case would be around 2300 so not much deduction left. I think I will qualify for lifetime learning credit as my agi will be < 130K for married filing jointly. My daughter is in college so will be eligible for AOTC also. So between LLC and AOTC, I shall be able to save 3K in taxes. But in any case, I will not be able to subtract that amt as tuition and fees on line 34 so no wash and my agi will be increased by 2500

 

[Blue Collar Guy]

Join a resort, tell your old employer your going to switch fields and hospitality management is what your going to learn

 

[retire2020]

This was paid back to me as regular income - they cut FICA/Fed/State and issued me a check of $1495 out of that $2500 I already paid from my pocket. This is $1K tax hit. Any idea how/where I claim $2500 deduction when filing a tax.