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CLIENT ALERT: IRS Provides Only Limited Relief in 2012 for Retroactive Increase in Contribution Limit for Mass Transit Commuting Expenses

February 2013
Nina Krauthamer and Barry Salkin

The American Taxpayer Relief Act of 2012 (“ATRA”) enacted in early January 2013 retroactively increased the maximum pre-tax contribution limit for employees’ mass transit commuting expenses from $125 per month to $240 per month for 2012.  The limit rises to $245 per month for 2013.

ATRA was enacted in 2013, and in 2012 many companies limited their employees’ deductions for mass transit commuting to the $125 per month limit prior to ATRA.  IRS issued Notice 2013-8 offering limited relief for those employees who received “excess transit benefits”.  These are transit benefit expenses for 2012 either paid by an employer or through a post-tax salary reduction agreement.  

However, most employers in 2012 capped an employee’s monthly mass transit commuting expenses at $125, and employees who had mass transit commuting expenses in excess of $125 paid for those expenses out-of-pocket, with post-tax dollars, frequently by credit card.  Employees in the latter category are not currently eligible for relief.  In other words, employees who elected for 2012 to contribute the then maximum of $125 per month will not benefit at this time from the new retroactive change.

We have had informal discussions with government officials who indicated that the IRS is aware of this issue, and is considering whether 2012 relief can be provided to affected individuals and, if so, the manner in which such adjustment can be made.

Please contact the Olshan attorney with whom you regularly work or either of the attorneys listed below if you have any questions regarding the retroactive reinstatement of the higher permissible monthly contribution for mass transit commuting expenses in 2012.

This publication is issued by Olshan Frome Wolosky LLP for informational purposes only and does not constitute legal advice or establish an attorney-client relationship.  To ensure compliance with requirements imposed by the IRS, we inform you that unless specifically indicated otherwise, any tax advice contained in this publication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.  In some jurisdictions, this publication may be considered attorney advertising.
Copyright © 2013 Olshan Frome Wolosky LLP.  All Rights Reserved.
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