Qualified Transit and Parking Benefits Guidance

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The IRS issued an informational letter on the tax treatment of qualified transportation benefits, specifically the use of transit passes and qualified parking that employers frequently provide through the use of smartcards.

Among the topics covered are:

  • Qualified Parking Benefits may be offered by Employers as cash reimbursements for substantiated expenses by crediting the reimbursed amounts onto employees’ smartcards.
  • Employers may roll over excess salary reduction amounts when an employee reduces his or her compensation for a month that exceeds the transportation or parking expenses actually incurred for that month.
  • The sum of rolled-over credits accumulated on a smartcard from a prior month plus the new month’s funds may exceed the maximum monthly amount and that there are no overall accumulation limits.
  • Benefits are not qualified transportation expenses if an employee can receive a cash refund for unused expenses, but nothing prevents an employer from requiring that employees return unused transit cards provided as salary supplements.
  • An employer can establish its own guidelines limiting mass transit benefits to travel between home and work, which is not required under the statute or regulations.

Read the letter: http://www.irs.gov/pub/irs-wd/10-0146.pdf

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