Business Services

FAQs - Taxation on Employee Tuition & Fee Waivers

Who will be impacted by the taxation of tuition & fee waivers?

Any Western Illinois University employees who are receiving graduate-level tuition and fee waivers. 

Note that if you receive tuition and fee waivers from another IL university, that institution may report those to WIU and we must tax them as well.

Why are employees being taxed on their tuition and fee waivers?

This is required by federal law. Under Internal Revenue Service regulation (IRC 127), tuition and fee waivers awarded to employees are to be considered taxable income once the total tuition and fee waiver amount exceeds $5,250. This means that employees who receive more than $5,250 in tuition and fee waivers in a calendar year must be taxed on the amount exceeding the allowable amount.

How is the withholding amount determined?

The value of the tuition and fee waivers exceeding $5,250 is subject to withholding tax based on the completed W-4 on file with the Payroll Office. As such, the amount withheld may differ among employees. Questions should be directed to the Payroll Office, (309) 298-1867.

The tuition and fee waiver does not come in the form of a payment to me. How will the withholding be made?

When the value of the tuition and fee waiver exceeds $5,250 in a calendar year, the excess is included as taxable income as non-cash earnings. This means you will not see a pay increase in your check, but rather the excess waiver amount is added to your regular earnings. When non-cash earnings are added to your assistantship stipend, the University must calculate and withhold the additional tax due.

The withholding will be spread over a few months in the regular semester-long contracts to minimize the impact of the deduction. If the $5,250 tuition and fee waiver amount is exceeded in the spring semester, withholdings will be taken from the March, April, and May paychecks. If the $5,250 tuition and fee waiver amount is exceeded in the fall semester, withholdings will be taken from October, November, and December paychecks.

What happens to the taxes that are withheld?

Both the amount of taxable income associated with the tuition and fee waiver (amount exceeding $5,250 in the calendar year) and the taxes that the University withholds with respect to such income are reported on Form W-2. The taxes that the University withholds are forwarded to the IRS and credited to your tax liability for the year.

Is it possible that the tax withholding will result in my take-home pay in those pay periods being significantly reduced?

Yes. Your tax liability may result in a lower paycheck depending on the value of your tuition and fee waiver and the wages you receive for the services you perform for the University.

Who do I contact if I have questions concerning the taxation of tuition and fee waivers?

Questions concerning withholdings may be directed to the Payroll Office at (309) 298-1867 or  payroll@wiu.edu .