May 5, 2022 4:38 am

Unused Transportation Fringe Benefits Are Lost

Employers may offer employees certain tax-free transportation fringe benefits up to set dollar limits. These can be arranged through employer payments or employee payments on a pre-tax basis (salary reduction agreements). Once an employee commits to a salary reduction agreement for the year, it can’t be changed. This is so even if commuting patterns change. For example, an employee may opt to work from home and no longer needs commuter benefits. The IRS ruled informally that unused commuter benefits can’t be contributed to a health flexible spending account (FSA) offered through a cafeteria plan (IRS INFO 2022-002). Transportation fringe benefits may not be offered through a cafeteria plan, so they can’t be contributed to one.

Last year, certain elections under cafeteria plans were allowed to be changed due to COVID-19 (Notice 2021-15). However, the changes were limited to benefits provided under a cafeteria plan and did not relate to transportation fringe benefits.

Tax Glossary

Amended return

On Form 1040X, you may file an amended return within a three-year period to claim a refund or correct a mistake made on an original or previously amended return.

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