I can take money out of my paycheck, pre-tax, to pay for my mass transit train ticket. I thought the reasoning behind this was to encourage people to use public transportation to help keep the environment clean, to help with traffic congestion, etc.

 

Am I incorrect in this assumption?

 

The reason I ask:

 

A guy in our company has money taken out, pre-tax, to pay for his parking pass. He drives alone, not carpooling. Why should the government be encouraging and rewarding him for driving to work, alone, in an SUV?!

I can take money out of my paycheck, pre-tax, to pay for my mass transit train ticket. I thought the reasoning behind this was to encourage people to use public transportation to help keep the environment clean, to help with traffic congestion, etc.

 

Am I incorrect in this assumption?

 

The reason I ask:

 

A guy in our company has money taken out, pre-tax, to pay for his parking pass. He drives alone, not carpooling. Why should the government be encouraging and rewarding him for driving to work, alone, in an SUV?!

Is that legal? I thought the checks had to be made out to a mass transit group (CTA, SS, METRA etc)?

Is that legal?  I thought the checks had to be made out to a mass transit group (CTA, SS, METRA etc)?

He saves his tickets and sends them in and gets reimbursed.

He saves his tickets and sends them in and gets reimbursed.

He takes them as a deduction on his taxes?

He takes them as a deduction on his taxes?

That's not allowed.

 

Sounds like he gets an expense check from his employer.

That's not allowed.

 

Sounds like he gets an expense check from his employer.

That could be. Expense checks are tax free right?

No, not a right off. He estimates what he spends on parking, has that taken out of his paycheck, pre-tax, and at the end of each month sends in all his parking passes, which are basically receipts, and they send him a check. Anything he over-estimated carries to the following month. He does not get that until he proves he parked that much.

That could be.  Expense checks are tax free right?

Yep.

No, not a right off. He estimates what he spends on parking, has that taken out of his paycheck, pre-tax, and at the end of each month sends in all his parking passes, which are basically receipts, and they send him a check. Anything he over-estimated carries to the following month. He does not get that until he proves he parked that much.

That's an interesting way of doing it.

That could be.  Expense checks are tax free right?

Yes, because the money you spend up front has already been taxed. That would be a double tax.

No, not a right off. He estimates what he spends on parking, has that taken out of his paycheck, pre-tax, and at the end of each month sends in all his parking passes, which are basically receipts, and they send him a check. Anything he over-estimated carries to the following month. He does not get that until he proves he parked that much.

I really wonder if that is legal. The system was meant for mass transit. I wonder if the guy found a loophole, or is just begging for an audit.

I really wonder if that is legal.  The system was meant for mass transit.  I wonder if the guy found a loophole, or is just begging for an audit.

I agree, but it's been offered. I questioned it immediately.

I can take money out of my paycheck, pre-tax, to pay for my mass transit train ticket. I thought the reasoning behind this was to encourage people to use public transportation to help keep the environment clean, to help with traffic congestion, etc.

 

Am I incorrect in this assumption?

 

The reason I ask:

 

A guy in our company has money taken out, pre-tax, to pay for his parking pass. He drives alone, not carpooling. Why should the government be encouraging and rewarding him for driving to work, alone, in an SUV?!

mreye...

 

I get my metra pass pretax. Funny thing is I never even thought about why they offered it. I guess I figure if I can save a few bucks I do it...no questions asked.

 

Now what that guy is doing sounds pretty fishy to me...

mreye...

 

I get my metra pass pretax. Funny thing is I never even thought about why they offered it.  I guess I figure if I can save a few bucks I do it...no questions asked.

 

Now what that guy is doing sounds pretty fishy to me...

He's not the fishy one. Either the company or the Govt is, but what he's doing is perfectly acceptable under the program.

Parking allowances and car allowances (transportation allowances in general) are usually taxable - meaning you get a 1099 for it at the end of the year.

 

Since he's taking that parking allowance and twisting it into the "pretax" program that's set up, I have to question this too.

 

The company has a lot less chance of being audited on this then does the individual, but I don't think what they are doing is technically allowed under the law.

 

I'd have to get the code out and look and I ain't doing that right now.

Parking allowances and car allowances (transportation allowances in general) are usually taxable - meaning you get a 1099 for it at the end of the year.

 

Since he's taking that parking allowance and twisting it into the "pretax" program that's set up, I have to question this too.

 

The company has a lot less chance of being audited on this then does the individual, but I don't think what they are doing is technically allowed under the law. 

 

I'd have to get the code out and look and I ain't doing that right now. 

Ah, GAAP

 

Oh wait you mean GAAP is that accounting tome?

 

GAAP

Parking allowances and car allowances (transportation allowances in general) are usually taxable - meaning you get a 1099 for it at the end of the year.

 

Since he's taking that parking allowance and twisting it into the "pretax" program that's set up, I have to question this too.

 

The company has a lot less chance of being audited on this then does the individual, but I don't think what they are doing is technically allowed under the law. 

 

I'd have to get the code out and look and I ain't doing that right now. 

Depending on position, some transportation expenses are deductible. When I was a full time salesperson, all my business miles and expenses were deductible. It would make sense to not use post tax income for those expenses. Because, in the end, it would be deducted. It would seem that this would streamline the end of the year reporting and simplify returns.

 

Now if his position would not qualify for taking a deduction for travel, it would seem to be wrong.

 

This seems to be a natural expansion of the health care funds.

yea, it's deductible as long as you are claiming that as a part of your income and the company is not reimbursing you for it.

 

And by the way, this ain't GAAP. This is tax code. Big difference. So piss off your money somewhere else. ss2k.

yea, it's deductible as long as you are claiming that as a part of your income and the company is not reimbursing you for it.

 

And by the way, this ain't GAAP.  This is tax code.  Big difference.  So piss off your money somewhere else. ss2k. 

GAAP, tax code, its all CPA nerd talk to me.

Update! I just got this from my HR people:

 

The IRS has raised the monthly maximums effective in 2005 for transit and parking.  These changes will go into effect on January 1, 2005. 

 

Maximums are as follows: $105 per month for transit

  $200 per month for parking

Update! I just got this from my HR people:

You get more of an allowance for Parking than mass-transit? :headshake

You get more of an allowance for Parking than mass-transit?  :headshake

Sort of defeats the purpose, huh?