Under the Tax Cuts and Jobs Act effective for 2018, Qualified Transportation Fringe Benefits (QTFB) no longer qualify as a deductible expense for employers, even while remaining non reportable as income for employees.
For Tax Exempt employers, QTFB must be reported as taxable income on Form 990 T, and this income is subject to the flat corporate rate of 21%. QTFB includes the provision of transit passes and payments for parking. The IRS has indicated that it also includes the amount of Voluntary Employee Salary Reductions set aside for plans that are used to pay for employee transportation costs or parking costs. In 2018 employees could set aside up to $260 a month for both eligible transportation and parking costs, respectively, which would be excludable from reportable wages. NYC has mandated the transit program for employers with twenty or more employees, thus this is almost a universal benefit for employers in New York City.
Corporations generally have to make quarterly estimated tax payments if they anticipate owing $500 or more in taxes for the tax year in order to avoid penalties and interest. The due dates for estimates are typically April 15, June 15, September 15 and January 15 of the tax year the benefit is provided. Given the amount that may be set aside by each employee and the applicable corporate tax rate of 21%, the threshold for estimated tax payment can easily be met.
Form 990-W should be used for calculating estimated tax payments due. Estimates must be paid using electronic funds transfer.
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