By Payroll and Entitlements Editorial Staff
The IRS has released an information letter responding to an employee that would like to roll over unused transit benefits into a parking account. The employee said that he used to take public transportation to commute to work, but due to COVID-19, he is now using his personal vehicle to drive instead.
The IRS noted that the employee is not precluded from rolling over unused transit benefit amounts through the use of another qualified transportation fringe, such as qualified parking, to the extent it is offered by the employer’s plan and does not exceed the maximum monthly amount for the respective qualified transportation fringe benefit. Note that the adjusted maximum monthly excludable amount for 2020 is $270 for qualified parking. There is a separate $270 monthly limitation for the combined total amounts of transportation in a commuter highway vehicle and transit passes.
Therefore, as long as the employee has made a valid compensation reduction election and their employment has not been terminated, the employee can begin using the compensation reduction amounts for commuting expenses in future months.
However, the IRS cautions that the qualified transportation plan rules do not allow refunds of qualified transportation fringe benefits that are provided through a compensation reduction agreement.
The IRS notes that information letters provide general statements of well-defined law without applying them to a specific set of facts and are for informational purposes only. Information letters are not a ruling and may not be relied on as such. (IRS Release 20-0024, September 8, 2020).
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