Harvard’s IRS Mistake Costs 11,000 Employees Extra Taxes

An tax-accounting mistake by Harvard University has cost some employees as much as $3,000 to $4,000 in taxes they didn’t owe, The Boston Globe reported on Friday. The institution’s mistake led as many as 11,000 workers to pay taxes on money they didn’t earn from 2009 to 2013.

Over all, Harvard reported nearly $20-million in error, according to a letter of apology sent to the employees on Friday. Only a “small number” overpaid thousands of dollars, but hundreds paid several hundred dollars extra, the newspaper said.

The institution has promised to pay the money back or to help workers get refunds from the Internal Revenue Service, but only after Daniel I. Halperin and Alvin C. Warren, two professors who specialize in tax law, met with administrators after Harvard’s initial letter to employees, on January 21. In a letter to law-school colleagues last week, the two said the university had underestimated the cost of the error in its initial letter to the workers. It had also misstated the law by telling them that the IRS would not allow Harvard to help them get refunds, they said.

The mistake occurred because the institution changed its supplemental-life-insurance plan, regarded as a taxable benefit until 2009. It seems that no one in human resources or payroll realized that the changes in the plan made it no longer taxable, according to the Globe.