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The Wagner Law Group

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 

 

Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

 

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Boston 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110


Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

Tampa

Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 

 

San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104

 

St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 

 

www.wagnerlawgroup.com

 

 

 

 

January 21, 2016

 

 Health and Welfare Law Alert

 

 

 

 IRS Guidance Implements Retroactive Changes to 2015 Transit Benefit Limits

 

 

 

On December 18, 2015, President Obama signed the Consolidated Appropriations Act of 2016 (the "Act") into law.  The Act permanently increases the combined maximum monthly exclusion amount for transit passes and commuter highway vehicles to equal the maximum monthly exclusion amount for qualified parking benefits.

 

 

The IRS subsequently issued Notice 2016-6 to provide guidance to employers on implementing the changes to transit benefit limits made by the Act.  The Notice includes a special administrative procedure for employers to use to correct FICA overpayments related to the exclusions. 

 

 

Background.  Prior to the Act, employees could only exclude (from their 2015 taxable income) a maximum of $130 per month for transit passes and commuter highway vehicle benefits.  However, during 2015, the maximum allowable exclusion for qualified parking was $250.

 

 

Consolidated Appropriations Act of 2016.  The Act permanently amends Section 132(f) of the Internal Revenue Code to create parity between the transit benefit exclusion and the qualified parking exclusion.  In particular, the Act:

 

  • Retroactively increases the monthly transit benefit exclusion from $130 to $250 per participating employee for the period between January 1, 2015 and December 31, 2015.  For 2016, the monthly transit benefit exclusion amount is increased to $255.

 

  • Permanently extends the combined monthly exclusion limit for transit passes and commuter highway vehicle transportation to match the monthly limit for qualified parking benefits.

 

The Act's retroactive exclusion increase for 2015 applies regardless of whether transit benefits were provided either by the employer (i.e., from its own funds) or by the employee (i.e., through salary reduction arrangements with the employer).

 

 

 

Notice 2016-6.  The Notice provides a method for employers to use to avoid filing Forms 941-X to correct over-collected Social Security and Medicare tax amounts from employees.  Specifically, the Notice identifies a special administrative procedure for employers to use in filing Forms 941 for the fourth quarter of 2015 and Forms W-2 to reflect the changes in the amounts excludable from their employees' income.  To use this special procedure, employers must repay to employees the over-collected FICA taxes on these transit benefits for all four quarters before filing the fourth quarter Form 941. 

 

 

 

The Notice also addresses the process required for employers that are ineligible for the special administrative procedure.  Employers can use Form 941-X under the normal procedures that apply for correcting FICA tax overpayments. 

 

 

 

The Notice further explains that employers must adjust affected employees' Forms W-2 to account for the increased exclusion for 2015 in calculating the wages reported in Box 1, Box 3, and Box 5.  Employers that use the Notice's special correction procedure (and have repaid withholding overpayments) must also adjust the amounts reported in Box 4 and Box 6 of affected employees' Forms W-2. 

 

 

 

NOTE: The Notice explains that employees may neither retroactively increase their compensation reduction for 2015 (to take advantage of the increased monthly transit benefit limit) nor reduce their compensation by more than $255 per month in 2016 to receive a reimbursement for transit expenses incurred in 2015.  

 

 

 

Takeaway for Employers.  The deadline for filing Forms 941 for the fourth quarter of 2015 is January 31, 2016.  Thus, eligible employers that wish to use the special administrative procedures offered in the Notice must act quickly to take the required action steps.  Because the Act makes the parity provision permanent, however, employers will not have to address these same correction issues at the end of 2016. 

 

 

 

 

 

 

The Notice is available at:  https://www.irs.gov/pub/irs-drop/n-16-06.pdf

 

  

 

 

 

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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.