|
frequently asked questions
By Employers
What is the Commuter Choice Program?
Commuter Choice refers to recent changes in the
Internal Revenue Code [(26 USC 132(f)] which
permit employers to offer employees a tax-free
benefit to commute to work by methods other than
driving alone.
Why is there a Commuter Choice Program?
The Commuter Choice Program provides incentives
for employees to choose public transit or
vanpools. The program addresses many important
quality of life issues. The hidden burden of
excessive automobile use shows up in taxes for
road and highway construction and repair as well
as traffic enforcement.
Traffic congestion contributes to stress, road
rage and lost time. We all pay the price for
excessive auto use. By lowering the number of
single occupant automobiles on the roads, we
conserve energy. We regain productive time now
spent on congested roadways.
The air is cleaner. We all benefit from a
healthier, more pleasant environment. Supporting
your employees with Commuter Choice boosts
morale. It makes you more attractive as an
employer competing for highly skilled workers in
a competitive economy. Commuting to work is more
affordable for everyone. It is a critical link
for workers who are making the transition from
welfare to work.
By establishing Commuter Choice in your
organization, you are helping your employees do
the right thing.
It’s good for the bottom line. It’s good for the
environment. It’s good for all of us.
How will Commuter Choice affect my bottom
line?
Increased productivity. Your employees will
arrive ready to work. They won’t be bringing
with them the frustration associated with
traffic congestion and road rage or the
tardiness associated with unforeseen traffic
tie-ups.
Tax savings. Not only will your employees save
state and federal income and payroll taxes, so
will you. Your net pay out also will be reduced
for FICA, Federal Unemployment tax and Federal
income tax. In Wisconsin, state income tax pay
out will also be reduced. And that’s good for
business!
Competitive edge. Baby boomers and Generation
Xers are redefining the way America thinks about
work. They choose socially responsible companies
that are committed to the environment. They want
benefits that support their lifestyles. When
asked if your company is environmentally
friendly and socially responsible, with Commuter
Choice, you will be able answer “yes.”
How
can I implement Commuter Choice?
There
are several ways in which your employees may
receive a transit or vanpool benefit.
|
1. |
The
most attractive option to employees is for the
company to cover the full cost of the transit
benefit. Some companies offer the Commuter
Choice benefit as a low-cost salary or wage
enhancement.
You
may decide to do the same. You also may elect to
provide a partially subsidized benefit in
addition to your employees’ current salary. The
benefit would be free of all payroll and income
taxes to your employees, and you would deduct
the cost from your business income taxes. |
|
2. |
A
second option is to offer Commuter Choice as a
“pre-tax” benefit. You may permit your employees
to have the full 31-Day Pass price of $47.00
taken out of their current monthly pay, towards
the actual cost of commuting on transit or in
vanpools before taxes are applied.
Many
employers prefer this option because the
employee pays the cost. Your share of FICA and
unemployment taxes are also reduced. IRS
requirements must be followed to ensure that
transit benefits remain tax-free.
It’s
great for employees and it saves you money.
|
|
3. |
You
may share the cost of commuting with your
employees. You may elect to pay for a portion of
the tax-free transit benefit and allow your
employees to pay the balance of the costs by
having their share taken out of their salary
before taxes.
At the
present time, the total maximum amount eligible
as a tax-free benefit is $100 per month of
actual costs, even when you share the costs.
However, the most expensive Metro pass is only
$47.00.
|
Can
I simply reimburse my employees for their
commuting expenses?
In
areas where vouchers that can be exchanged for
transit media or vanpool services are not
readily available, you may reimburse your
employees for the cost of transit. See IRS rules
governing section 132(f) benefits for a
definition of “readily available.” However, this
is not the case in the Metro service area.
If
I already provide a parking benefit, can it be
converted to a transit or vanpool benefit?
Yes.
Many employers provide free or subsidized
parking for employees, making it more economical
for the employee to commute by automobile. The
goal of Commuter Choice is to make it as
economical for employees to use mass transit.
You
may establish a parking “cash out” program. Your
employees may forego parking and cash out the
value of the parking benefit. The value of the
parking benefit will be subject to taxes.
However, if up to $100 of the value is converted
to Commuter Choice transit or eligible vanpool
benefits, the amount converted will be not be
subject to taxes.
There
is no real cost to you, if you are leasing
parking spaces for your employees. You simply
transfer your cost for the parking space to a
direct payment to your employees. Should the
employee decide to accept the cash value rather
than a tax-free Commuter Choice transit or
vanpool benefit, the amount is treated as
additional compensation and they also incur
payroll
and income taxes. If the cash out value is
greater than $100, your employees could accept a
tax-free Commuter Choice transit or vanpool
benefit and receive the balance in taxable
salary.
Do
all vanpools qualify for this benefit?
No. A
vanpool, or “commuter highway vehicle” must have
a seating capacity of at least six adults (not
including the driver) and at least 80% of the
mileage must be for purposes of transporting
employees between their homes and places of
employment.
For
these commuting trips, the number of employees
transported must be at least one-half of the
adult seating capacity of the vehicle, excluding
the driver.
Can
I give my employees both a transit and vanpool
benefit?
Yes.
However, the maximum tax-free amount is $100 per
month. This same limit applies whether these
benefits are provided separately or in
combination with one another.
For
example, you could give an employee a $53.00
vanpool benefit and a $47.00 transit pass for a
monthly total of $100, but not a $70 vanpool
benefit and a $47.00 transit pass, since the
total of $117.00 would exceed the tax-free limit
of $100. Any amount over $100 would not be
tax-free.
Does the $100 limit increase over time?
Yes.
With changes in the cost of living, the tax-free
amount could increase each year. The IRS will
announce any increases. If your company is
paying the cost, the decision to increase your
benefit rests with you. Keep in mind that
Metro’s current $47.00 monthly pass is much less
expensive than the current $100 limit.
Where can I obtain further information?
•
Visit the Federal Transit Association's website
Need more information?
For more information
on obtaining Metro passes and tickets, e-mail
Mick Rusch at
mrusch@cityofmadison.com.
•
Printer Friendly Information
(PDF)
|
