The Wagner Law Group
Wagner Law Group, A Professional Corporation, is a nationally
recognized ERISA & employee benefits, estate planning,
employment, labor & human resources practice.
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.
Wagner Law Group
Fax: (561) 293-3591
7108 Fairway Drive
Palm Beach Gardens, FL 33418
East Kennedy Boulevard
Tampa, FL 33602
Francisco, CA 94104
100 South 4th Street, Suite 550
St. Louis, MO 63102
January 21, 2016
Health and Welfare Law
IRS Guidance Implements
Retroactive Changes to 2015 Transit Benefit Limits
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.
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
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.
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:
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.
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
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
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.
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