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Employers Can Obtain Refund for Excess FICA Tax Paid as Result of Increased Excludable Limit for Transit Benefits

by Maureen O’Brien and Ruth Wimer

On January 11, 2013, the Internal Revenue Service published Notice 2013-8 providing a special administrative procedure for employers with respect to 2012 transit pass benefits. The American Taxpayer Relief Act retroactively increased the monthly transit benefit exclusion under Section 132(f)(2)(A) of the Internal Revenue Code for commuter highway vehicles or transit passes from $125 per participating employee to $240 per participating employee for the 2012 calendar year (the monthly transit benefit exclusion for parking remains at $240). The notice addresses employers’ questions regarding the retroactive application of the increased exclusion, which can result in both decreased FICA and federal income tax liability. Employers acting promptly, in many cases by January 31, may have less administrative burden in obtaining a benefit for themselves and their employees with respect to the retroactive increase for employer-provided transit benefits.

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Transit Pass and Vanpool Benefits to Shrink to $125 Per Month in 2012

by Ira B. Mirsky and Ralph DeJong

Millions of people across the United States will experience a significant increase in the cost of their daily commute to work, and many employers will suffer a corresponding increase in payroll taxes for 2012 and beyond, unless U.S. Congress acts before the end of 2011.  The reduction will also restore a significant gap between the exclusion limit for employer-provided transit pass or vanpool benefits and qualified parking benefits, and creates an unintended economic subsidy that may influence some commuters’ choice to drive themselves to work over using mass transit. 

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