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ARTICLE · 24 JANUARY 2013

Correcting 2012 Withholding Errors

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One of the changes made by the American Taxpayer Relief Act was to restore the $240 monthly limit on employer-provided transit passes or commuting transportation, which had reverted to $125 as of January 1, 2012, and the IRS has now issued Notice 2013-8 in order to provide guidance on how to deal with the issues presented by the retroactive application of the increase.

United StatesTax
Jeffrey Ashendorf
Jeffrey Ashendorf
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One of the changes made by the American Taxpayer Relief Act ("ATRA") was to restore the $240 monthly limit on employer-provided transit passes or commuting transportation, which had reverted to $125 as of January 1, 2012.  The increase was made applicable both retroactively for 2012, and for 2013.  (The excludible amount for 2013, which is indexed, has been announced at $245.) 

The IRS has now issued Notice 2013-8 in order to provide guidance on how to deal with the issues presented by the retroactive application of the increase. Employers who provided transit benefits during 2012 in excess of $125 per month but not in excess of $240, and who treated the excess over $125 as taxable wages (which was correct), now find themselves, with the application of this retroactive change, possibly having withheld (and paid) too much FICA tax. (Extra income tax would also have been withheld, but that cannot be adjusted retroactively after year-end, so the Notice deals only with

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