Square & Compas

I need a clearer explaination of the new bicycle reimbursement employers can give to employees. I know it is up to $20.00 a month for maintenance, repairs, certain types of purchases, like tires, tubes, etc. That much I understand.

What I don't understand is the part about they can only do so if they are not already paying for some other type of transportation benefit for employees.

I'll use my employer as an example. The building I work in in downtown Sioux City has a city parking ramp right next to it. They pay for the employees to park in the ramp, what ever the montly rate is, I do not know know the amount. My questions are because they do this would my employer NOT be able to reimbursment the $20.00 a month for commuting to and from work on my bike? Because they already pay for me to be able to park my motor vehicle in the ramp, even though I hardly drive it to/from work in the spring and summer? What if I stopped driving in the spring/summer and turned in my pass to get in/out of the ramp, could they then reimburse me the $20.00 a month? Which would probably be far cheaper then paying the monthly fee to park in the ramp, especially since my vehicle is only parked there for half a day. With only one vehicle my wife walks from where she works to get our car. We have differant shifts so when I do drive, I take her in the morning, coem back home, get ready, drive myself to work, she walks down to get the car, goes home, then returns to pick me up after I am off work.

Scubachisteve

It depends.

A few questions:
1. Does your company have a section 132 plan?
2. Do you elect any pre-tax deductions for other commuter expenses such as train/bus passes for which you are reimbursed?

Your company needs to setup a fringe 'plan' before they can reimburse you. And they won't flat out give you $20. The plan works by allowing you to set aside $20 a month pre-tax for bicycle related items which creates a net benefit of a couple dollars to you depending on what tax bracket you are in. The government likes to word tax benefits to sound like you get $20(!) when really they're just allowing you to keep a few bucks in taxes because you're doing something socially acceptable in their eyes (like having kids or getting married; being green is the new hotness so papabear is going to cut you a break for riding your bike). Loves me some gubmint social engineering through taxes

Sorry I can't help but get snarky when I start talking about Uncle Sam. Regardless, there are some more details which I can get into depending on what other questions you have (and how you answer the ones asked). Just let me know.

-Scubachi

Scubachisteve

One clarifying point. Your employer COULD decide to contribute a portion of that $20 to you. If that happened I assume it would still come to you without being taxed (not sure though) and the employer can write it off as an expense. This may be how they pay for your parking. If that is the case then you would not qualify for the $20 reimbursement.

As a practical example:

I put my bike on the train everyday and ride from the train station to the office. Via my section 132 plan I've elected to set aside $120 a month pre-tax in a fringe account, from that account my employer pays me every time I give them a receipt for my train pass. My employer has the option of paying into some of that $120 expense thus taking the write-off (and reducing the amount I can set aside), but they don't. In any case if I or my employer are taking advantage of that existing benefit during the year, then I, nor they, can receive any further tax benefit from the $20 bicycle add-on.

In your case, If your employer just leases a bunch of parking spaces, hands out passes and doesn't take a credit via S.132, then you could take advantage of the $20 credit (whether subsidized by your employer (ideal) or just as a pre-tax benefit to you). That is, if you convince them to create a plan and add another fringe line to the payroll.

Okay, now I'm just rambling.....

Cheers!
Steven

Square & Compas

To questions number 1, what is a Section 132 Plan?
For question number 2, no I do not elect any pre-tax deductions for any type of commuter expenses. So there is nothing to be reimbursed for.

Tomorrow I am going to ask my employer HR dept. if they have a Section 132 plan set up.

Scubachisteve

Question 2 was essentially question 1, so it appears that you don't have the plan.

Yes, asking your employer to get a 132 plan is a good start. Getting plan documents is very inexpensive and the selling point is that the cost could be offset by savings in FICA taxes that the employer doesn't have to pay on employee deferrals(depending on how big your company is or how many people take advantage of it this happens sooner or later).

If you have employees that commute via public transportation they can use up to $120 a month pre-tax to pay for transit passes. Sounds like you got parking taken care of but you can get an addition $240(?) a month pre-tax to pay for parking related to work (i.e. train/bus station near your house or garage near your office). If you use these benefits you can't take advantage of the bike thing.

Administratively, this is one of the easier things that your employer should be able to do which can be perceived as a huge benefit to employees. I know because I'm the HR guy at my company and I just set one up!

That said- nothing in this thread should be construed as official tax advice or otherwise; or even remotely accurate Now that that's out of the way...Good Luck!

-Steven

(This thread might be more appropriate in the Commuter Forum so maybe the mods could move it)

buzzman

wow. good HR guy!

Scubachisteve

OKAY, BIG CLARIFICATION.

"May Employees Use Pre-Tax Compensation To Fund this Benefit?

No. Unlike other qualified transportation fringe benefits, employees may not pay for this benefit using pre-tax compensation. The bicycle benefit is funded solely with employer contributions."

I just read this in HR Magazine. So, that means that you cannot use your own pre-tax income to pay. Your employer must be kind enough to give you the $20 (and take the write off). This makes sense considering the nature of the money that's funding it...I think. I've been wrong before, obviously

Dchiefransom

Do you ride your bike to work more times than you drive your car? Where do you put your bike at work? Maybe instead of giving you the $20 and taking the write-off they could install a bkie locker for you to use. They might be able to take a write-off for that.

JonathanGennick 

I dislike those sorts of plans. The mental overhead in keeping track of them is a PITA. For a mere $20 a month shift from post- to pre-tax dollars, I don't think I'd even bother. (I wouldn't bother w/the plan. I'll still ride my bike!)

crhilton

Nothing I have read supports this statement. It appears that the company deducts this on their taxes and has the option to give you $20 a month as reimbursement for your expenses.

Even the $115 benefit for busing would be utterly ridiculous if this were the level of money provided. $10 will barely buy you a bus pass if you qualify as "poor." I have my doubts that this is structured as you say. It wouldn't be worth the administrative costs for a company to pursue it or the bus benefit.

https://www.bikeleague.org/news/100708faq.php

Also they mention the employer having the option to "flat out give you $20" if you bring in receipts for the purchases you used it on.

So, are we sure that this is in fact a deduction on taxable income or is it a certain amount of money off your taxes (by "you" I mean a company and not an employee)?

Scot_Gore

The guidance that your employer will use to set up the program is in the IRS 15B
https://www.irs.gov/publications/p15b/ar02.html
It's down the page under Transportation (Commuting) Benefits

And indeed, it says:The pre-tax option for the parking, bus, and van pool benefits has generally been in place to allow for "not for profit" organizations to provide some degree of commuter benefits.
Example:
You can subsidize your employees bus pass and take it right off the top of your corporate taxable income AND your employee does not have to pay taxes on the subsidy. That, in a nutshell is how the Transportation Fringe Benefit Act is structured.

But what if you work for a non-profit (like the government, or a State University, or the American Red Cross), your employer does not pay taxes, so being able to "deduct" this subsidy from your taxable income does not help the organization it just costs them money. The IRS came up with a "alternative" (I don't see this "alternative in the original,10 year Fringe Benefit Act) for non-profits and made an administrative ruling to allow pre-tax deductions for Commuter expense vs direct subsidy by non profit employers. This way it does not cost the non profit money for no benefit and the employees still enjoy a small degree of tax incentive by being able to fund commuting expenses pre-tax with their own money.

Some "for profit" employers also offer these benefits as pre-tax vs direct subsidy as well, it's not against the rules. For example, my employer subsidizes bus passes with company money, but only offers parking benefits on a pre-tax deduction method, and does not offer van pools at all.

I imagine that the IRS looked at the numerous "service providers" for bicycle commuting services and made the decesion that offering the benefit as a pre-tax deduction was unworkable. With parking and bus benefits pre-tax payments, employers generally only have one or two service providers to deal with and most employers deduct the money pre-tax from your payroll and pay those few service providers directly vs giving you the money and you pay. This keeps them "safe" if ever audited for taxes. They can clearly show that the deduction they took was paid directly to ABS parking serivces or your local transit authority. With bicycle benefit, they don't have that same opportunity. Your bicycle expenses might go to almost anybody, a dozen different bike shops, Wal Mart, an on-line retailer, the city for a bike locker.....whatever. So, they don't have a clear way of demonstrating to the IRS that they sheltered $20.00 a month of your income from payroll taxes that went to bicycle commuting.

It's a narrow and risk adverse interpretation. A system for doing this is in place for day care expenses that also has 1000's of service providers, but they have likely decided that for this small a payment and a percieved small audience of potential recipents that it's "just not worth it".

My thoughts
Scot

Dchiefransom

A monthly pass for VTA here is just over $61 a month. Unlimited bus rides. Express bus is more. A 31 day pass for AC Transit is $70. That covers two counties. Transbay to San Francisco is more. A monthly pass on the ACE train is $121 from my station, with transfers to VTA buses and Light Rail being free while displaying the ACE ticket(you only get the ride from the train station to your destination). Some companies actually purchase the tickets for their employees and hand them out at work.

Scubachisteve

See my latest post. I covered this. The transportation fringe plan is structured this way, and yes (you are right) the bicycle expense can not be excluded from taxable income. It can only be employer paid.

The mass transit deduction is $120 *monthly* which makes it worthwhile for employee and employer.

Scott- you're right. There's not as much incentive for a non-profit to offer a bicycle benefit.

crhilton

Do you think that due to the $20 per month price it won't be enough for a lot of employers to bother with it? I.E., the costs to do it will be higher than the benefit of doing it?

That would really suck, especially since the original bill was for a much greater amount than $20.

Scot_Gore

For an employer that's already offering the transit incentive that's been around 10 years in the Transportation Fringe Benefit Act, offering the Bicycle Benefit won't be that much of an administrative hassle or add work to what they have already opted to take on.

I highly doudt that employer that is not already offering Transportation Fringe Benefits is going to suddenly start now that bicycles are included. I don't think that has anything to do with the amount of money in the program. I think it's a matter of (pardon the expression) critical mass. If the employee population that uses public transit has not driven the employer to offer these benefits, the population that bikes to work certainly isn't going to cause movement on the issue. The highest percentage in the nation of commuters who get to work by bicycle is just a little bit more than 3% and they are far above almost anybody else. This small a population is not likely going to "tip" the company toward a change in policy.

The only thing I can think of is if the employer is trying to make a statement about being a "Green" company that would might swing somebody on the issue.

My thoughts
Scot

Square & Compas

Ok, so bottom line. Does my employer HAVE to have a Section 132 Plan? Or can they pay me the $20.00 a month and claim it at the end of the year as a deduction for themselves? The way I read it a Section 132 Plan is a fund, similar to flex-spend medical plans, that employees would pay into, then get reimbursed from that. A Section 132 costs money for my employer to set up. As a result of this they are not going to do that this year. In fact they are looking at ways of custting costs with the economy being in the toilet right now. They just laid off 3 people in my dept this week.

So would it be cheaper for my employer to pay me the $20 for commuting to/form work on my bike and claim it at the end of the year as a deduction for themselves rather then pay my monthly parking rate and claim that as a deduction, without the use of a 132 Plan? Is a 132 Plan REQUIRED for this to work?

I am getting confused here and from what it seems receiving mixed info. Please dumb it down for me in simple terms. I am not a tax expert nor an expert in HR when it comes to how benefits work and how they are set up. I prefere yes and no answers, don't need a lot of fluff with the answer. If a further explaination is given please dumb it down for me. And the web links with the info., while appreciated are more confusing with the answers then what I receive here.

Coyote2

Bump. Any ideas?