The IRS has issued guidance for employers to manage the retroactive commuter tax break Congress passed in December 2014.1 The break for commuter fares was increased to $250 a month to match the amount allowed for parking — retroactive to Jan. 1, 2014 and good through Dec. 31, 2014.
The Service has provided simplified procedures for employers to use in filing Form 941, Employer’s Quarterly Federal Tax Return, for the fourth quarter of 2014 to reflect changes in the excludable amount for transit benefits provided in all quarters of 2014 and in filing Forms W-2.
The procedures only address overcollected FICA taxes due to the lower transit benefit amount. Employers are generally required to repay or reimburse employees the amount of overcollected FICA tax. However, employers cannot adjust overpayments of income tax after the end of the calendar year.