IRS Provides Administrative Guidance On Excludable Transportation Benefit Limits, Retroactively Increased As Of January 1, 2012

by Pepper Hamilton LLP
Contact

On January 16, 2013, the Internal Revenue Service (IRS) issued Notice 2013-8 providing a special administrative procedure for employers with respect to 2012 transit benefits. Under Section 132(f) of the Internal Revenue Code of 1986, as amended (the Code), all “qualified transportation fringe” benefits are excluded from gross income, which includes employer-provided transportation in a commuter highway vehicle between home and work and transit passes (collectively, Qualified Transit Benefits) and qualified parking.

The American Taxpayer Relief Act of 2012 (ATRA) provides parity for the monthly excludable amount for Qualified Transit Benefits to the monthly excludable amount for qualified parking. Before the enactment of the ATRA, the amount of excludable transit fringe benefits was $125 per month for Qualified Transit Benefits and $240 for qualified parking. The ATRA retroactively increased the monthly transit benefit exclusion for Qualified Transit Benefits to $240 per participating employee for the 2012 calendar year (i.e., this provision is effective retroactively beginning January 1, 2012). The “qualified transportation fringe” benefit limit (for both Qualified Transit Benefits and qualified parking) increased to $245 for 2013.

Notice 2013-8 also addresses employers’ questions regarding the retroactive application of the increased exclusions, which can result in both decreased FICA and federal income tax liability. Employers acting promptly, in most cases by January 31, 2013, may have less administrative burden in obtaining a benefit for themselves and their employees with respect to the retroactive increase for Qualified Transit Benefits.

Form 941

Employers that included excess Qualified Transit Benefits in gross income and wages, but have not yet filed their fourth quarter Form 941 (Employer’s Quarterly Federal Tax Return) for 2012 should do the following:

  • repay or reimburse their employees the over-collected FICA tax on the excess Qualified Transit Benefits for all four quarters of 2012 on or before filing the fourth quarter Form 941
  • reduce the fourth-quarter wages, tips and compensation reported on line 2, the taxable Social Security wages reported on line 5a and Medicare wages and the tips reported on line 5c by the excess Qualified Transit Benefits for all four quarters of 2012, and
  • take into account the 2012 Social Security wage base limit of $110,100.

The above procedure will allow employers to avoid having to file Forms 941-X and possibly, Forms W-2c.

Employers that have already filed the fourth-quarter Form 941 must use Form 941-X to make an adjustment or claim a refund for any quarter in 2012 with regard to the overpayment of tax on the excess Qualified Transit Benefits after repaying or reimbursing the employees (or for refund claims, securing consents from its employees). Employers that have not repaid or reimbursed the employees who received excess Qualified Transit Benefits in 2012 on or before filing the fourth-quarter Form 941 must (i) use Form 941-X to make an adjustment or claim for refund with respect to the excess Qualified Transit Benefits provided to those employees and (ii) follow the normal procedures.

Forms W-2

In all cases, employers must report in box 2 (federal income tax withheld) the amount of income tax actually withheld during 2012. The additional income tax withholding will be applied against the taxes shown on the employee’s individual income tax return (Form 1040, U.S. Individual Income Tax Return).

  • Employers who have not furnished 2012 Forms W-2 to employees should take into account the increased exclusion for Qualified Transit Benefits in calculating the amount of wages reported in box 1 (Wages, tips, other compensation), box 3 (Social Security wages), and box 5 (Medicare wages and tips).
  • Employers who already filed 2012 Forms W-2 with the U.S. Social Security Administration need to file Forms W-2c (Corrected Wage and Tax Statement) to take into account the increased exclusion for Qualified Transit Benefits.
  • Employers that have repaid or reimbursed their employees for the over-collected FICA taxes prior to furnishing Form W-2 should reduce the amounts of withheld tax reported in box 4 (Social Security tax withheld) and box 6 (Medicare tax withheld) by the amounts of the repayments or reimbursements.

If you have any questions regarding Notice 2013-8 or any other relevant fringe benefits issues, please contact the Pepper Hamilton LLP attorney you generally work with, or one of the authors of this Alert.

Written by:

Pepper Hamilton LLP
Contact
more
less

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!