The IRS has just released an information letter affirming that qualified transportation amounts including salary reduction amounts cannot be cashed out. As a reminder, qualified transportation is available for qualified parking ($280 for 2022), mass transit and van pooling ($280 for 2022).
A tax payer recently requested an explanation of whether unused amounts resulting from COVID-related changes in transportation needs could be cashed out. The information letter affirms, that in fact, these amounts cannot be cashed out. They can only be used for the permitted benefits. These types of letters are informational only. They do not hold the weight of law but they do indicate how the governing agency reviews these matters.
As a reminder, a qualified transportation plan can be designed to allow individuals to change their election frequently. Said another way, individuals are not locked into a 12-month election as they are under a cafeteria plan. Employers sponsoring qualified transportation programs may want to review their programs and make sure employees monitor their account balances and make modifications as appropriate.
The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.