Employee Benefits-IRS Provides Guidance On Retroactive Increase In Excludible Transit Benefits

IRS Notice 2013-8 provides guidance on issues related to the enactment of section 203 of the American Taxpayer Relief Act, which increased the monthly transit benefit exclusion under section 132(f)(2)(A) of the Internal Revenue Code (for community highway vehicles and transit passes) from $125 per participating employee to $240 per participating employee for the period of January 1, 2012 through December 31, 2013 (Rev. Proc. 2013-15 specifies that-due to increases for inflation- the maximum monthly excludible amount for 2013 is $245).

To address employers’ questions regarding the retroactive application of the increased exclusion for 2012 and to reduce filing and reporting burdens, the Notice clarifies how the increase applies for 2012 and provides a special administrative procedure for employers to use in filing Form 941, Employer’s Quarterly Federal Tax Return, for the fourth quarter of 2012 to reflect changes in the excludible amount for transit benefits provided in all quarters of 2012, and in filing Forms W-2, Wage and Tax Statement.