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Published on Sep 27
The costs associated with traveling to and from work can quickly add up – especially for employees using mass transit or parking in nearby parking garages. For some job seekers, the costs associated with a daily commute may lead them to turn down an offer from your company. Sheakley can help you take the sting out of work-related commuting costs with a Parking and Transit Account. This flexible spending account allows employees to set aside pre-tax dollars to pay for expenses related to their work commute, including transit passes, tokens, fare cards, parking passes, and more.
What is a Parking and Transit Account?
By allowing employees the option to have pre-tax money withheld from their paychecks to cover the costs of commuting, the Parking and Transit Account lowers an employee’s overall tax burden – increasing their take-home pay.
Governed by Section 132 of the IRS code, Parking and Transit Accounts can only be used to pay for qualified, work-related mass transit and parking expenses. For 2019, employees can be reimbursed up to $265 for the costs of commuting and an additional $265 for parking.
The IRS has strict guidelines for eligible transit and parking expenses. If an anticipated parking or transit expense does not appear on the qualified list, please check with your plan administrator for clarification on whether or not it is covered under the account. The most common, eligible items are:
- Trains & subways
- Commuter highway vehicles
- Car Service Apps — uberPOOL and Lyft Line
- Parking at or near your place of employment
- Parking at a location from which you commute to work
How do Parking and Transit Accounts work?
Parking and Transit Accounts work much like any other flexible spending account. However, the work-related commuter expenses covered are for the individual employee only and cannot be used to cover commuting expenses for a spouse or dependent.
Employees elect how much they want to have withheld each pay period, up to the maximum monthly limit for each account. Receipts for eligible expenses from the parking facility or transit provider along with a completed claim form must be submitted in order for a reimbursement to be processed. The amount submitted each month cannot exceed the limits defined by the IRS. Employees may change their withholding amount at any time to account for changes in parking or transit rates.
How does it help my employees?
When employers elect to add a Parking and Transit Account to their list of benefit options, employees are the real winners. Due to the pre-tax nature of these accounts, participating employees can reduce their tax burden and increase their take-home pay.
Since the funds for Parking and Transit Accounts are deducted before taxes are calculated, the employee’s gross income is decreased, lowering the overall amount paid in federal, state, and FICA taxes. The higher the employee’s federal tax bracket, the more they can save.
What are the benefits for my company?
Just as your employees’ federal tax liability decreases by participating in a Parking and Transit Account, your company can also save on payroll-related taxes. Employers who offer these accounts can realize significant savings on FICA taxes. Additionally, offering Parking and Transit Accounts can help with your recruitment and retention efforts.
Plan administration you can trust
Selecting the right flexible benefit plans for your employees can be a daunting task for many small and medium-size employers – that’s where we come in. Sheakley’s Flexible Benefits experts provide the advice and support employers need to select the right flexible benefits to meet the needs of their company and employees. It starts with a consultative meeting to determine the right mix of flexible benefit options to best meets the needs of your business and employees. In addition to comprehensive plan management, Sheakley’s team provides training and educational opportunities to help your management team and employees better understand and utilize their benefits.
Contact us for your free consultation today. Stay up-to-date on all things Sheakley by subscribing to our blog and following us on social media. Join the discussion by commenting below.