Transportation Subsidy Back to $130 per Month

In December, Obama signed into law a $41.6 billion tax break program. The law included a plan that retroactively raised the monthly mass-transit subsidy. The increase in the tax-free qualified public transportation and van-pool fringe-benefit arrangements increased to $250 a month, previously $130 a month, for 2014.

Employers who reported adjustments to transportation benefits for 2014 had to file Forms 941-X for each quarter to adjust for the retroactive increase in excludable amounts.  To do this, employers must first repay employee Social Security and Medicare taxes that were withheld for the excess transportation benefit amounts.  Employers also need to reimburse employees for the employee share of FICA taxes and additional Medicare taxes on the excess benefits.

Employers have to reimburse these amounts to employees before correcting the employer share of FICA taxes. However, it is not necessary for employers using this procedure to obtain written statements from employees indicating that they did not and will not make claims for FICA tax refund.

The increase in the tax-free qualified public transportation and van-pool fringe-benefit arrangements to $250 a month from $130 a month for 2014 was approved Dec. 16 by the Senate and Dec. 3 by the House, and signed by the president on December 19. The bill was only retroactive for 2014, the mass-transit subsidy decreased back to $130 a month for 2015.

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