IRS Announces Increase in Qualified Transportation Benefits Exclusion for Qualified Parking
and Revenue Procedure 2011-52
, the Internal Revenue Service (IRS)
announced that the monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011.
Other Exclusions Revert to Previous Levels
The IRS also announced that the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012. As previously reported, the American Recovery and Reinvestment Act of 2009, also known as ARRA, increased the monthly exclusion for transit passes and commuter highway vehicles under §132 of the Internal Revenue Code of 1986 (IRC) for part of 2009 and all of 2010 and 2011. Since this provision of ARRA expires December 31, 2011, the exclsuion reverts to the previous limit of $120, adjusted for inflation to $125 for 2012.
Contact Vision Payroll Today
Contac Vision Payroll today if you have further questions on the qualified transportation benefits exclusion.
Why Don’t My Massachusetts Wages Equal My Federal Wages on My W-2?
This week’s question comes from Jordan, a company controller. For most employees in our company, the Massachusetts wages reported on the Form W-2 equal the federal wages on the Form W-2. My Massachusetts wages, however, are higher than my federal wages. Why don’t my Massachusetts wages equal my federal wages on my W-2? Answer: There may be several reasons why Massachusetts wages don’t equal federal wages on a Form W-2.
Differences Between Federal Wages and Massachusetts Wages on Form W-2
Although Massachusetts generally follows federal law on income taxation of wage benefits, certain items may increase or decrease Massachusetts wages as compared to federal wages. Among the differences are the following:
- Employee and employer contributions to Massachusetts governmental unit §414(h) retirement plans are taxable for Massachusetts purposes and not for federal purposes,
- The value of an employer-provided monthly transit pass in excess of $120 and not in excess of $230 per month is taxable for Massachusetts purposes and not for federal purposes,
- Imputed income from cost of health insurance coverage of former spouses and non-dependent children as required under Massachusetts law is taxable for federal purposes and not for Massachusetts purposes (prior to the change included in the Patient Protection and Affordable Care Act),
- Employee contributions to cafeteria plans for the benefit of a same-sex spouse and that spouse’s children when the same-sex spouse or that spouse’s children do not qualify as a dependent of the employee are taxable for federal purposes and not for Massachusetts purposes,
- Qualified tuition reduction that an educational organization provides to the same-sex spouse of an employee is taxable for federal purposes and not for Massachusetts purposes, and
- Employer contributions to an accident or health insurance plan for the benefit of a same-sex spouse and that spouse’s children when the same-sex spouse or that spouse’s children do not qualify as a dependent of the employee are taxable for federal purposes and not for Massachusetts purposes.
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Contact Vision Payroll if you have further questions on the differences between federal wages and Massachusetts wages on Form W-2.
What Is the Monthly Limit on the Value of Qualified Transportation Benefits?
This week’s question comes from Steve, an HR director. We provide transportation benefits to our employers. In 2010, we could exclude $230 per month for most qualified transportation benefits. What is the monthly limit on the value of qualified transportation benefits? Answer: The Internal Revenue Service (IRS)
announced inflation adjustments related to several tax provisions. Among them, the IRS
announced that for 2011, the monthly limit on the value of qualified transportation benefits provided by an employer to its employees would remain at $230.
Details Found in Revenue Procedure 2011-12
Details on the inflation adjustments are found in Revenue Procedure 2011-12. The eight items for which adjustments are included are the following:
- Tax Rate Tables
- Child Tax Credit
- Hope Scholarship and Lifetime Learning Credits
- Earned Income Credit
- Standard Deduction
- Qualified Transportation Fringe
- Personal Exemption
- Interest on Education Loans
Qualified Transportation Benefits Limits Are Unchanged
Employers are again allowed to exclude from wages the value of transportation benefits provided to an employee up to the following limits:
- $230 per month for combined commuter highway vehicle transportation and transit passes.
- $230 per month for qualified parking.
- For a calendar year, $20 multiplied by the number of qualified bicycle commuting months during that year for qualified bicycle commuting reimbursement of expenses incurred during the year.
Do You Still Have Questions on Qualified Transportation Benefits?
Contact Vision Payroll if you have further questions on the limit on the value of qualified transportation benefits.
The Internal Revenue Service (IRS) recently released Information Letter 2010-0146, which answers “several questions about the tax consequences of certain employer-provided transportation benefits.” Among the issues the IRS addressed are the ability to perform, and the repercussions of, rollovers of unused benefits on smartcards, limits on the amounts of rollovers or accumulations, the definition of a commuter, the requirement to use transit passes only for commuting and only by employees, as well as several other guideline questions. Vision Payroll recommends that employers providing such benefits review their plans and procedures with their attorney to ensure compliance with the latest guidance.
The American Recovery and Reinvestment Act of 2009, also known as ARRA, increased the monthly exclusion for transit passes and commuter highway vehicles under §132 of the Internal Revenue Code of 1986 (IRC). For January and February 2009, the maximum excludible amount of qualified transportation fringes was $230 per month for qualified parking and $120 per month for transit passes and commuter highway vehicles. Starting in March 2009, the excludible amount for transit passes and commuter highway vehicles increased to $230 per month. The qualified parking fringe remained the same. The amounts will be indexed for inflation for 2010. The fringe benefits can be either paid by the employer and excluded from income or paid from funds contributed on a tax-free basis to a transit reimbursement account as part of a plan established by employers. Contact Vision Payroll if you have any questions on qualified transportation fringe benefits under IRC §132.
In a response to Senators Richard Durbin (D-IL) and Barack Obama (D-IL), the Internal Revenue Service, in Information Letter 2009-0012, explains why employees who terminate employment are not entitled to receive any remaining balance in their transit reimbursement accounts.
Employees may voluntarily elect under §132 of the Internal Revenue Code of 1986 (IRC) to contribute a portion of their earnings to transit reimbursement accounts. Employees are technically not purchasing the benefit themselves, since doing so would require them to receive taxable compensation. The legal form of the transaction is that the employees are given a choice between cash compensation and the benefit provided by the employer. Once employees elect to have the benefit provided by their employers, employees are “no longer entitled to receive that compensation.” If the employees could choose to receive cash compensation, the entire value of the fringe benefit and cash compensation received would be taxable. Since employees forfeit their right to receive cash compensation when electing the fringe benefit, unused balances at termination of employment are funds of the employer, not the employee.
Contact Vision Payroll if you have any questions on qualified transportation fringe benefits under IRC §132.
This week’s question comes from Luna, a business owner: I have employees who bicycle to work; can I reimburse them for their costs? Answer: §132(f) of the Internal Revenue Code has been amended by §211 of the Emergency Economic Stabilization Act (Public Law 110-343 or the “bailout bill”) so that effective with tax years beginning after December 31, 2008, employers may reimburse employees who “regularly [use] the bicycle for a substantial portion of the travel between [their] residence and place of employment” as long as the employee does not receive any other “qualified transportation fringe”. Costs to be reimbursed include “purchase of a bicycle and bicycle improvements, repair, and storage”. The limitation is $20 per month multiplied by the number of qualified commuting months. Contact Vision Payroll if you have any question on reimbursements for any qualified transportation fringe benefit.
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