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Retroactive increases to employer-provided mass transit and carpool benefits for 2012 enacted by the American Taxpayer Relief Act (Pub. L. 112-240) are causing headaches for payroll departments and employers during the 2013 tax season, practitioners told BNA (Bureau of National Affairs) in recent interviews.

For employees who received the maximum employer-provided transit benefits during 2012, the retroactive change created a $115 taxable wage adjustment each month, adding up to a total maximum wage adjustment of $1,380. For a fully funded plan, this would result in a maximum FICA refund of $78. With an additional withholding of a maximum $345 in federal income tax, employees could potentially recoup a total federal refund of $423.

Many employers were unable to take advantage of the simple adjustment procedure in Internal Revenue Service guidance issued Jan. 16 (Notice 2013-8) because employers using payroll service providers typically have Forms 941, Employer’s Quarterly Federal Tax Return, and W-2, Wage and Tax Statement, processed in early January, said Debera Salam, director of payroll information and processes services at Ernst & Young LLP.