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Procedures for the Retroactive Application of Increased Transit Benefits

Saul Brenner, CPA, J.D., LL.M. 02.18.2016 | eVisor

For all of 2015, the maximum exclusion for a commuter vehicle or transit pass was $130 per month, while the amount allowed for parking was $250 per month. The Consolidated Appropriations Act of 2016 retroactively reinstated parity between the benefits - increasing the commuter vehicle and transit pass benefit limit for 2015 to $250 per month.  The IRS has now issued procedures1 for employers who paid benefits in excess of $130 per month in 2015 and who wish to make corrections for the fourth quarter.

The notice provides simplified procedures for filing Form 941, Employer's Quarterly Federal Tax Return, for the fourth quarter of 2015 to reflect changes in the excludable amount for transit benefits provided in all quarters of 2015 and in filing Forms W-2.  The procedures address over-collected FICA taxes that came about from the lower transit benefit amount.  In such cases, employers are generally required to repay or reimburse employees the amount of over-collected FICA tax.  However, employers cannot adjust overpayments of income tax after the end of the calendar year.  Moreover, although employers can refund over-collected FICA taxes after the end of the tax year, they cannot refund over-collected additional Medicare tax after the end of the year. 

1 Notice 2016-06

Questions? Contact your Berdon advisor or Saul Brenner, CPA, J.D., LL.M.

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