A new revenue ruling will shut down an abusive employment tax arrangement involving double employer reimbursements for an employee's parking expenses.
The ruling clarifies that employer reimbursements for parking aren't excludible from income and wages for employment tax purposes if the parking has already been paid for by the employee on a pre-tax basis (such as by salary reduction elections by employees). The ruling won't affect regular arrangements between employers and their employees that provide qualified parking benefits.
"This is a classic 'double-dip' arrangement that recently has come to our attention," said acting assistant secretary for tax policy Greg Jenner. "The Treasury and the Internal Revenue Service have acted promptly to shut it down, enabling responsible taxpayers and their advisors to stay away from such double-dip arrangements in the future."
The ruling explains that since pre-tax parking is provided by the employer, and not the employee, there is no expense by the employee that can be reimbursed with excludible funds. The arrangement could be invisible to the employee, whose take-home pay remains unchanged. The ruling also applies to other double-dip arrangements that exclude alleged reimbursements of the cost of nontaxable benefits that are provided by employers on a pre-tax basis.
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