I received $6000 stipend check for tuition reimbursement at the very beginning of the year for Graduate school.NO taxes were taken out of that check. I assumed I would just be paying taxes on it when I file my taxes in April. But yesterday they let me know that my next 4 paychecks will have tax deductions from the reimbursement from 10 months ago. I realize I need to pay taxes on it, but can they just spring it on me 12 hours in advance that my paycheck will be $600 less for the next 4 paychecks till the end of the year , leaving me with practically half of a paycheck and no way to live on that? There was no advanced warning that they were going to wait till the end of the year and that its almost 40% taxes. So it's a total of $2400 in taxes.

The Government is concerned that you also won't have the money ($2,400 total) to pay taxes when taxes are due in 2012. Filing estimated taxes is not unusual.

But they should have warned me that they were going to do it on my last 4 paychecks. There was no warning. I am not prepared to lose 1200 a month for 2 months

You should read publication 970. Any scholarship or fellowship or grant for tuition and fee for a degree student is not taxable. Any tuition reduction for a degree student is not taxable. But you got stipend!
Is it payment for services?

I think everyone is misunderstanding what I'm asking. My stipend is taxable, that's not my qusetion. My question is does my company have a right to take the taxes 9 months later out of my paycheck without warning me and leaving me struggling for 2 months with half of a paycheck

That is between you and the company. There are probably only FOUR pay periods left in the tax season, so the company MUST withhold the taxes on the stipend before the end of the year, so there is not a lot of wriggle room.

I think everyone is misunderstanding what I'm asking. My stipend is taxable, that's not my qusetion. My question is does my company have a right to take the taxes 9 months later out of my paycheck without warning me and leaving me struggling for 2 months with half of a paycheck


I understood your question - YES, the company has the "right" to withhold taxes from your stipend. Should "someone" have warned you that taxes would be withheld? Possibly. There is nothing in your paperwork explaining that this is taxable and explaining quarterly estimated tax payments?

I think the OP understands full well that the stipend is taxable, and that the company should have withheld taxes at the time they paid it to him. His question is more specific - having failed to withhold as they should have back in January, can they now come back in November and make up for the withholding?

The answer is yes. Yes, the payroll department screwed up, but yes they have to set it right before the end of the year or face possible IRS penalties for failing to properly withhold taxes from their employee's pay. Look on the bright side: the good news is that by taking the withdrawal out of your pay now it avoids the possibility of you having to pay interest charges when you file your taxes for underpayment of estimated taxes during the year.