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The current law allows employers to
give employees up to $1200 per year ($100 per month) as
a pre-tax payroll deduction or a tax-free employee
benefit. For more information on Transportation
Commuting Benefits, click here for
The IRS issued final regulations on Qualified
Transportation Fringe Benefits in January 2001. This
document contains regulations relating to Qualified
Transportation Fringe benefits and provides rules to
ensure that transportation benefits provided to
employees are excludable from gross income. These final
regulations reflect changes to the law made by the
Energy Policy Act of 1992, the Taxpayer Relief Act of
1997, and the Transportation Equity Act for the 21st
Century and affect employers that offer Qualified
Transportation Fringes and employees who receive these
benefits. Click
here for rules and regulations.
Transportation
Benefit Administration – Employee Accountability Plan
Transportation
(Commuting) Benefits
This
section discusses exclusion rules that apply to benefits
you provide to your employees for their personal
transportation, such as commuting to and from work.
These rules apply to the following transportation
benefits.
·
De minimis
transportation benefits.
·
Qualified
transportation benefits.
De
Minimis Transportation Benefits
You
can exclude the value of any de minimis transportation
benefit you provide on a MyTransitPlus Card to an
employee from the employee's wages. A de minimis
transportation benefit is any transportation benefit you
provide to an employee if it has so little value (taking
into account how frequently you provide transportation
to your employees) that accounting for it would be
unreasonable or administratively impracticable. For
example, it applies to occasional transportation fare
you give an employee because the employee is working
overtime if the benefit is reasonable and is not based
on hours worked.
Employee.
For this exclusion, treat any recipient of a
de minimis transportation benefit as an employee.
Qualified
Transportation Benefits
This
exclusion applies to the following benefits.
- A
ride in a commuter highway vehicle between the
employee's home and work place.
- A
transit pass.
- Qualified
parking.
The
exclusion applies whether you provide only one or a
combination of these benefits to your employees.
Qualified
transportation benefits can be provided directly by you
or through a bona fide reimbursement arrangement.
However, cash reimbursements for transit passes qualify
only if a voucher or a similar item that the employee
can exchange only for a transit pass is not readily
available for direct distribution by you to your
employee. A voucher is readily available for direct
distribution only if an employee can obtain it from a
voucher provider that does not impose fare media charges
or other restrictions that effectively prevent the
employer from obtaining vouchers. The MyTransitPlus Card
eliminates incremental voucher values that often do not
meet individual’s transit needs.
You
can exclude qualified transportation fringe benefits
from an employee's wages even if you provide them in
place of pay.
Commuter
highway vehicle.
A commuter highway vehicle is any highway
vehicle that seats at least 6 adults (not including the
driver). In addition, you must reasonably expect that at
least 80% of the vehicle mileage will be for
transporting employees between their homes and work
place with employees occupying at least one-half of the
vehicle's seats (not including the driver's).
Transit
pass.
A transit pass is any pass, token, farecard,
voucher, or similar item entitling a person to ride,
free of charge or at a reduced rate, one of the
following:
- On
mass transit.
- In
a vehicle that seats at least 6 adults (not
including the driver) if a person in the business of
transporting persons for pay or hire operates it.
Mass
transit may be publicly or privately operated and
includes bus, rail, or ferry. The MyTransitPlus
Card offers benefit to both Pass and distance-based fare
media users.
Qualified
parking.
Qualified parking is parking you provide to
your employees on or near your business premises. It
includes parking on or near the location from which your
employees commute to work using mass transit, commuter
highway vehicles, or carpools. It does not include
parking at or near your employee's home. The
MyTransitPlus Card allows the employee to settle with
the parking facility.
Employee.
For this exclusion, treat the following
individuals as employees.
- A
current employee.
- A
leased employee who has provided services to you on
a substantially full-time basis for at least a year
if the services are performed under your primary
direction or control.
Exclusion
from wages.
You can generally exclude the value of
transportation benefits that you provide to an employee
during 2004 from the employee's wages up to the
following limits.
- $100
per month for combined commuter highway vehicle
transportation and transit passes.
- $195
per month for qualified parking.
Benefits
more than the limit.
If the value of a benefit for any month is
more than its limit, include in the employee's wages the
amount over the limit minus any amount the employee paid
for the benefit. You cannot exclude the excess from the
employee's wages as a de minimis transportation benefit.
Employers.
If you are an employer and you reimburse
employee business expenses, how you treat this
reimbursement on your employee's Form W–2 depends in
part on whether you have an accountable plan.
Reimbursements treated as paid under an accountable
plan, as explained next, are not reported as pay.
Accountable
Plans
To
be an accountable plan, your employer's reimbursement or
allowance arrangement must include all three of the
following rules.
1.
Your
expenses must have a business connection — that is,
you must have paid or incurred deductible expenses while
performing services as an employee of your employer.
2.
You must
adequately account to your employer for these expenses
within a reasonable period of time.
3.
You must
return any excess reimbursement or allowance within a
reasonable period of time.
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