A not too long ago revised IRS webpage supposed for charities and nonprofit employers highlights the tax guidelines relevant to employer-provided parking and what to anticipate if the IRS audits this profit. As background, employers might present tax-free parking to workers as a certified transportation fringe profit below Code § 132(f). The greenback quantity of certified parking bills that could be excluded from an worker’s gross earnings can’t exceed a statutory most, which is topic to annual cost-of-living changes. (For 2022, the utmost is $280 per thirty days—see our Checkpoint article.) The webpage explains that the worth of employer-provided parking relies on the overall guidelines for valuing fringe advantages below Treas. Reg. § 1.61-21(b)(2). These guidelines present that an worker should embrace in gross earnings the quantity by which the truthful market worth of the profit exceeds the sum of the quantity, if any, paid for the profit by or on behalf of the recipient, and the quantity, if any, particularly excluded below the Code. The truthful market worth, which is set primarily based on all of the information and circumstances, is usually the quantity that a person must pay for the parking on the similar or a comparable website in an arm’s size transaction.
The webpage additionally gives ideas for IRS auditors who might encounter certified parking advantages as a part of their investigations. Auditors are suggested to—
Decide whether or not the employer gives parking for any workers;
Request a listing of workers entitled to obtain employer-provided parking;
Decide if the employer consists of any portion of the profit in workers’ wages;
Request the tactic used to find out the worth of the parking profit; and
If crucial, conduct a survey of close by parking services to find out the truthful market worth of the profit.
EBIA Remark: Valuation points usually come up with respect to certified parking solely the place it’s supplied in-kind by the employer—in different phrases, the place the employer gives parking at its personal lot. Employers offering certified parking advantages ought to doc how they decide the worth of the profit and be ready to supply that documentation within the occasion of an audit. For extra data, see EBIA’s Fringe Advantages guide at Sections XX.D (“Certified Parking”) and XX.H.4.a (“The way to Worth Certified Parking Advantages”).
Contributing Editors: EBIA Workers.
