Overview: Many employers provide commuter benefits to soften the blow of the high cost of commuting and to help recruit and/or retain valuable employees. This voluntary employee benefit program allows employees to reduce their monthly commuting expenses related to parking, transit, vanpooling and bicycling. Money used for eligible commuting expenses is excluded from gross income, and in many states, can also be excluded from state and local taxes.
Tax-free commuter benefits can be funded by:
In addition to helping with recruitment and retention, some employers provide transportation benefits for environmental and societal reasons. Driving to and from work on a regular basis takes a toll on the environment, traffic congestion and air quality. Offering commuter benefits may encourage workers to commute by mass transportation which, in turn, may reduce the number of commuters in cars, alleviate traffic jams, smog and damage to the environment.
Tracy Morley, SPHR, Legal Editor
Employees' salary and fringe benefits are subject to federal income taxes, Social Security and Medicare taxes, and federal unemployment insurance tax. However, certain cash and noncash fringe benefits may be offered to employees on a tax-free basis, while an otherwise tax-free fringe benefit becomes taxable compensation to employees if employers do not meet the rules for that particular fringe benefit .This section assists HR professionals in determining which fringe benefits (e.g., company car, health benefits) and other compensation (e.g., bonuses, awards) are taxable or not.
The IRS has issued special administrative procedures allowing employers to correct the retroactive increase in the maximum excludable amount for 2012 qualified transit benefits on fourth quarter Form 941 and Form W-2.
The American Taxpayer Relief Act of 2012, signed into law on January 2, 2013, made several payroll related changes. To help employers understand the impact of the new law, XpertHR has updated several sections of the Employment Law Manual and all related Worked Examples and How To tools.
XpertHR has updated its payroll content to reflect 2013 inflation adjustments in amounts for excludable transportation fringe benefits, adoption assistance benefits, the standard deduction and personal exemption.
Employers often provide employees with property and equipment such as computers. Accordingly, employers may restrict employee use of employer property, equipment and vehicles to work time only and condition use upon legitimate business purposes. The degree of monitoring that is permitted will depend in part on the reasonable expectation of privacy of employees in any given situation.
HR guidance on the benefits of providing commuter/transportation benefits.
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