Guidance for employers concerning retroactive extension of employee transit benefit

Retroactive extension of employee transit benefit

The IRS today released an advance copy of Notice 2015-2 that provides guidance and possible options for employers with respect to the retroactive extension of the increased monthly transit benefit exclusion under section 132(f)(2)(A).

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The Tax Increase Prevention Act of Increase Prevention Act of 2014—i.e., the “tax extenders” legislation—increased the monthly transit benefit exclusion under section 132(f)(2)(A) from $130 per participating employee to $250 per participating employee retroactively, for the period January 1, 2014, through December 31, 2014.

The IRS today issued Notice 2015-2 [PDF 30 KB] to address employers’ questions regarding the retroactive application of the increased exclusion for 2014 and in an effort to reduce filing and reporting burdens.

Special administrative procedure

Notice 2015-2 provides a special administrative procedure for employers who want to make adjustments for 2014 on the Form 941 filed for the fourth quarter of 2014. In other words, employers may follow this guidance in filing Form 941, Employer’s QUARTERLY Federal Tax Return, for the fourth quarter of 2014 to reflect changes in the excludable amount for transit benefits provided in all quarters of 2014 and in filing Forms W-2.

Notice 2015-2 also includes procedures for employers that have already filed Form 941 for the fourth quarter of 2014. These employers may use Form 941-X and “normal” procedures to make an adjustment or claim a refund for any quarter in 2014 with regard to the overpayment of tax on the excess transit benefits after repaying or reimbursing the employees or, for claims for refund, securing consents from their employees.

The IRS notice also includes instructions for employers that paid excess transit benefits during 2014 but have not yet provided their employees with Forms W-2 for 2014 and instructions for those employers that have already filed Forms W-2 for 2014.

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