Thomas Parisi, CPA

Retroactive Guidance for 2014

The IRS has issued Notice 2015-2, which provides employers guidance on how to deal with the retroactive (Section 103 of the Tax Increase Prevention Act of 2014 enacted 12/19/14) increase in the maximum monthly exclusion afforded employees from $130 to $250 for 2014. The increased exclusion is applicable to employer-provided transit passes and commuter highway vehicle (vanpooling) transportation benefits and puts them on par with the exclusion for qualified parking for tax year 2014. Such benefits are excluded under Section 132(f)(2)(A) of the Internal Revenue Code.
Within Notice 2015-2, the IRS has spelled out a special administrative procedure that is applicable to employers who have not filed their fourth quarter Form 941 and would like to avoid filing amended 941’s for all quarters in 2014. In order to qualify for this procedure, the employer must repay or reimburse their employees that qualify for such benefits the over-collected FICA tax on the “excess transit benefits” for the entire 2014 prior to filing the fourth quarter Form 941.

For those employers that have already filed their fourth quarter Form 941, they are precluded from this special procedure and must file an amended 941-X for each quarter that the repayment or reimbursement is applicable.

In addition, the IRS has included in the notice how such changes affect the 2014 Form W-2’s and provides guidance if such forms are or are not already distributed to their employees. As the January 31, 2015 filing due date for both Form 941 and the employees issued W-2’s is rapidly approaching, it’s imperative that those employers affected by this late tax law change take the necessary actions to properly reflect and file their year-end wage returns and statements.

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