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Transit Pass and Vanpool Benefits to Shrink in 2012 - Emil Estafanous, CPA : Emil Estafanous, CPA

Transit Pass and Vanpool Benefits to Shrink in 2012

Millions of people opposite a United States will knowledge a poignant boost in a cost of their daily invert to work, and many employers will humour a analogous boost in payroll taxes for 2012 and beyond, unless Congress acts before a finish of 2011.

The monthly taxation ostracism for employer supposing movement pass and vanpool advantages will cringe to $125 in 2012, from a stream $230, when a sustenance in Sec. 132(f)(2) providing for relation with employer-provided parking advantages expires during a finish of this year. Meanwhile, a monthly taxation ostracism for employer supposing parking advantages is scheduled to boost by $10 to $240 for 2012. This change could meant a detriment of hundreds of dollars of annual taxation assets for employees who use these benefits. It will also revive a poignant opening between a ostracism extent for employer-provided movement pass or vanpool advantages and competent parking advantages and emanate an mercantile funding that might change some commuters’ choice to expostulate to work instead of regulating mass transit.

Background

Sec. 132(a)(5) generally provides that competent travel border advantages supposing by an employer, including parking, movement passes, vanpool advantages and competent bicycle travelling reimbursements, are released from an employee’s taxable wages. In practice, competent travel border advantages might be supposing to employees as a approach advantage in further to worker wages, as partial of an worker pretax income rebate agreement, or as any multiple of a two.

2009 and 2010 Legislation

The travel border advantage supplies were initial sponsored as an beginning of a Environmental Protection Agency (EPA) to revoke both wickedness and trade by formulating incentives for some-more commuters to use mass transit. Prior to Feb. 17, 2009, there was a poignant opening between a ostracism extent for employer-provided movement pass or vanpool advantages ($100/month) and competent parking advantages ($175/month). The American Recovery and Reinvestment Act of 2009, P.L. 111-5, temporarily increasing (through Dec 31, 2010) a movement pass and vanpool extent to be equal to a parking extent ($230 per month, as practiced for inflation), to discharge an unintended mercantile funding that might change some commuters to select to expostulate themselves to work over regulating mass transit. Near a finish of 2010, a Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, temporarily extended a increasing extent by 2011 for movement passes and vanpools.

Inflation Adjustment for 2012

Starting in 2012, Rev. Proc. 2011-52 provides that a monthly ostracism underneath Sec. 132(f)(2)(A) for employer-provided movement pass or vanpool advantages will be $125. The monthly ostracism underneath Sec. 132(f)(2)(B) for competent parking advantages will be $240.

The Joint Committee on Taxation has estimated a cost of progressing relation between a ostracism for employer-provided mass movement and parking advantages to be $119 million for 2012 (Joint Committee on Taxation, Estimated Budget Effects of a Revenue Provisions Contained in a President’s Fiscal Year 2012 Budget Proposal (JCX-19-11), p. 5 (March 17, 2011)).

What Should Employers Do Now?

Employers providing movement pass or vanpool advantages need to confirm either to shorten to $125 employees’ monthly income deductions for 2012 or instead concede worker income deductions of adult to $240 per month. If income deductions for movement passes and vanpool advantages are available adult to $240 per month and a law does not change, amounts in additional of $125 per month will be taxable for 2012.

Congress could act to boost a monthly extent for movement passes and vanpools. If Congress were to retroactively boost a monthly extent after in 2012, and if monthly worker income deductions in 2012 have been limited to $125, a new extent could be practical going forward, though stream taxation manners would not assent employees to locate adult to a aloft extent for a apportionment of 2012 that already would have elapsed.

A last-minute change in a law would benefaction additional hurdles to employers in certain jurisdictions. For example, a City and County of San Francisco, and a circuitously cities of Berkeley and Richmond, Calif., generally need that employers with 20 or some-more employees offer competent travel border advantages to employees, including during slightest a pretax income reduction choosing unchanging with a extent reduction underneath sovereign taxation law. Thus, if a monthly movement pass extent is increasing after in 2012 (and maybe retroactively), employers in these jurisdictions and localities with identical legislation might be compulsory to make adjustments to a extent levels available underneath a taxation rules.

EditorNotes

Ira Mirsky is a partner in McDermott Will Emery LLP’s Washington, DC, office.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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