UPDATED GUIDANCE PROVIDED FOR TRANSIT BENEFITS UNDER THE SPECIAL ADMINISTRATIVE PROCEDURE

Thomas Parisi, CPA

The IRS has issued a clarification to IRS Notice 2013-8 as to the reporting of the 2012 retroactive adjustment to the tax-free exclusion of transit passes and transportation in a commuter highway vehicle on the 2012 fourth quarter Form 941.

Upon review the original guidance instructions on how to complete Form 941 (and Form 941 Schedule B, Report of Tax Liability for Semiweekly Schedule Depositors), IRS has noted the potential for a mismatch to occur in the filing of Form 941. It’s noted that a mismatch will occur between Form 941, line 10 (“Total Taxes”) and the total tax liability as reported on either Form 941, line 16, or on Form 941 Schedule B for such returns filed whose wage lines are reduced in accordance with the original guidance issued on January 23, 2013.

IRS advises those using the special administrative procedure to reduce their final tax liability for the quarter reported on either Form 941, line 16 or Schedule B by the amount of the tax reduction. If the amount of the tax reduction exceeds the final tax liability for the fourth quarter as reported on Form 941, line 16 or Schedule B, then the employers should reflect the final liability to “zero” and reduce the previous liability by the amount by which the reduction was greater than the final liability; continuing to apply the amount of the tax reduction to reduce previous liabilities until the amount of the tax reduction is completely used.

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