Many organizations take advantage of the opportunity to subsidize employee parking and commuting costs with pre-tax dollars. Some U.S. metropolitan cities require employers with 20 or more employees to offer qualified pretax transportation benefits to their workers or face penalties. These are great fringe benefits for employees that can boost morale and ease stress. These also provide tax saving opportunities for employers, but with its share of administrative burden. Changes have recently taken effect that not only apply to future benefits – but how employers will have to handle their 2015, 4th quarter tax returns and their 2015 employee W2s. (Employers that have already filed their 4th quarter Form 941 will have to submit an amendment. ) The Consolidated Appropriations Act became law in December 2015 to equalize the transit benefit tax exclusion as well as the exclusion for qualified parking benefits. The IRS published Notice 2016-6 to provide guidance on the nuances of this change and how to handle the retro-active nature that entails some of its elements.
Starting in January of 2016, the maximum monthly tax exclusion for parking benefits or transit benefits will be $255 respectively.
Though employers may not retroactively increase employees’ benefits to take advantage of the change, they will be required make the necessary adjustments to exclude the excess amount from the W2 forms for their employees.
As if that’s not enough – there is even more of a trickle affect to this change. This can also mean having to circle back to any salary deferral amounts that have already been established during benefits open enrollment that were based on last year’s limits. In most cases, this is no easy task. So the timing of the rate changes as well as the retroactive nature of applying the new limits to last year’s taxable income makes this change more difficult than most, affecting payroll, tax, HR and benefits in multiple ways.
It’s times like this that working with organizations like EPAY eases the burden by providing the ability to administer programs from one unified platform. When we are handling the complexities of compliance changes for you, your administrative burden is minimized and your liability is too. EPAY stays abreast of the complexities involved in benefits legislation applying it across the board so that all of our customers benefit and have a collective peace of mind.
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