Harvard Makes 11,000 Employees Pay Too Much In Taxes

How do you say 'ouch' in academic?

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Harvard University. The oldest institution of higher education in the country. Alma mater of more billionaires and Rhodes scholars than any other U.S. school. One of the pinnacles of academia and learning.

It's also home to 11,000 employees who were paying federal taxes they didn't owe -- as much as thousands of dollars -- between 2009 and 2013, according to the website Universal Hub. Sounds like someone in the administration should have spent time in a remedial math class.

The total amount overpaid was $20 million, according to a letter reportedly sent by the university to employees, according to the Boston Globe. In that report, a few paid "as much as $3,000 to $4,000" more than they should have. For hundreds, the extra payments were in the hundreds of dollars.

The cause of the miscalculation was supposedly an error in managing a supplemental life insurance policy, according to the Globe. Until 2009, the IRS saw it as a taxable subsidy that was part of income. That year, Harvard changed the plan for other reasons but forgot to check whether that changed the taxable status, which it did.

According to a memo reportedly from two Harvard Law School professors who are tax experts, obtained by Universal Hub, the university first became aware of the problem last October and sent a letter on January 21 to employees. But the two professors said that the letter was misleading in a number of ways.

First, it said that "IRS regulations do not allow the University to assist you in filing for a state or federal income tax refund." The two said that there was no such regulation.

Next, the professors said that Harvard did not present the full scope of the problem, omitting mention of 2009 and 2010 and failing to state that, according to the federal statute of limitations, it was already too late to refile for 2009 and receive a refund. A corrected W-2 form would be needed to refile to get a refund for 2010, but that Harvard would likely be unable to do so by the time of the April 15, 2014 deadline. They wrote, "Harvard has a responsibility to make its employees whole for its colossal error."

Harvard's motto, veritas, is Latin for truth. How do you say "ouch" in academic?

In a statement Friday night, according to the Globe, a Harvard spokesman said officials "regret this mistake, offer our sincere apologies to those affected, and are working to remedy the situation as comprehensively and swiftly as possible."

In a letter from Vice-President of Human Resources Marilyn Hausammann, obtained by Universal Hub, the school pledged to "make payments to current and former employees for excess taxes paid, plus interest" for 2009 and 2010 and also to cover any taxes that become due on those payments. Employees can also get reimbursed for their costs to prepare and refile other past taxes.

Wait a minute. According to the Globe, four of the last seven Secretaries of the Treasury had Harvard degrees. Does that mean everyone in the country might have paid too much? Quick, someone check their math!

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Image: Flickr user dmboyer

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