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Scholarship Fund
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Scholarship Fund
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I manage a company with 9 full time employees. Our owner came to me today asking that I find out how to set up a scholarship fund to pay for his daughter's private school expenses. He wants to reduce
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Forums » Topic Forums » Benefits & Compensation » Scholarship Fund
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Scholarship Fund
posted at 2/8/2011 10:17 AM EST
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Posts: 1
First: 2/8/2011 Last: 2/8/2011 |
I manage a company with 9 full time employees. Our owner came to me today asking that I find out how to set up a scholarship fund to pay for his daughter's private school expenses. He wants to reduce his pay by the amount of the scholarship so the company is not truly paying for this but he is. I cannot find a legal way to make this happen as it wouldn't truly be an IRS qualified scholarship fund since only his child would be eligible. Does anyone have any suggestions or alternatives to his request? His main goal is to reduce his taxable income as well as a long term garnishment that is being taken out. Thank you in advance for any input. |
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Scholarship Fund
posted at 2/9/2011 7:50 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
I agree with you that there is no way to do this legally under the IRC. If it were an accountable tuition plan for the employee themselves, you have a little leeway....but not for the employee's child.
Here's just one note I found.... The employer and the Commission agree to adhere to Section 117(b) of the Internal Revenue Code and regulation, and must document that employees are NOT BEING COMPENSATED FOR EMPLOYMENT WITH SUCH A SCHOLARHSIP, nor being provided an employment incentive. The scholarship should be for exclusively public purposes; its primary purpose is to educate recipients in their individual capacities. An Employee-sponsored scholarship administered by the Commission must meet the IRS guidelines for employee-related programs listed below. Percentage Test An Internal Revenue Service percentage test is used by the Commission to ensure compliance to rules and regulations regarding employer-related scholarship programs. ⢠Number of awards may not exceed 10% of the number of employees who were eligible, were applicants for the scholarship and were considered by the selection committee. ⢠Number of awards may not exceed 25% of the number of employeesâ dependents who were applicants for the scholarship and were considered by the selection committee; or ⢠Number of awards may not exceed 10% of the number of employeesâ dependents who could apply (this figure should include dependents that do not apply). But since he is the owner -- not sure if he is 100% owner or whether there is a board or someone else he has to work with -- he could possibly hire the child (depending on your state's employment, tax and child labor laws) and pay that child directly by lowering his own salary to do so. But that income would be taxable to the child and ultimately to him. So it would not save him much in taxes.... But it could lower his own salary and hence the garnishment. |
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