IRS Issues Guidance on Transit Benefit Exclusion

The IRS recently issued Notice 2013-8 to provide guidance for employers regarding the increased monthly transit benefit exclusion included in the American Taxpayer Relief Act (ATRA) enacted on January 2, 2013. The IRS has provided special administrative procedures for employers to use in filing Form 941 for the fourth quarter and Forms W-2 to account for this change.

Qualified transportation fringe benefits are excluded from gross income and include the following employer-provided benefits:
1.    Transportation in a commuter highway vehicle between home and work,
2.    Any transit pass, or
3.    Qualified parking

The ATRA retroactively increased the monthly transit benefit exclusion from $125 to $240 per participating employee for the 2012 calendar year.

Employers are permitted to make adjustments on Form 941 for the Fourth Quarter of 2012. Further details can be found in IRS Notice 2013-8 located on the IRS website.