Hey there @MyKidsPlace
So a couple of caveats. First, in the Community we can not offer anything that might be construed as accounting/tax/legal advice, and this pretty much falls into that category. That being said, yes, Square maybe should add this (and other benefits), but that is what we call a feature request, which you would submit here. Of course, this just gets the ball rolling and will not help you for this year or probably even next year unless they are already working on it.
I will go out on a limb here and hope I don’t get reprimanded, since this is not advice as much as it is showing you where to start for now. I am quoting from the IRS “FAQ about educational assistance programs.”
Background on educational assistance programs
You may exclude certain educational assistance benefits from your gross income if they are provided under a section 127 educational assistance program. That means that you won’t have to pay any tax on the amount of benefits up to $5,250 per calendar year and your employer should not include the benefits with your wages, tips and other compensation shown in box 1 of your Form W-2. However, it also means that you can’t use any of the tax-free education expenses as the basis for any other deduction or credit, including the lifetime learning credit. If any benefits are received under a program that does not comply with section 127 or if the benefits are over $5,250, the amounts may be excluded under section 117 or deducted under section 162 or section 212 if the requirements of such section are satisfied.
To me, this is saying that we SHOULD NOT put any educational assistance up to $5,250 on the W-2, period. But in order to deduct it, you would need to make the appropriate accounting entries in your bookkeeping software and for this you would need to reach out to your accountant/CPA for guidance. As long as you stay below the maximum amount allowed this is not really a Square issue at all — it is an accounting issue, period.
Chip A.
Square Expert & Innovator and member of the Square Champions group. (But NOT a Square employee, just a seller like you)
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