Question

LaMount works for a company in downtown Chicago. The company encourages employees to use public transportation (to save the environment) by providing them with transit passes at a cost of $275 per month.
a. If LaMont receives one pass (worth $275) each month, how much of this benefit must he include in his gross income each year?
b. If the company provides each employee with $275 per month in parking benefits, how much of the parking benefit must LaMont include in his gross income each year?

Answer 1

Answer:

a. $60 per year

b. $60 per year

Explanation:

The IRS decide the limit for Employee Fringe Benefit every year. As per the Latest Statutory limit, we can generally exclude the value of Transportation benefits during 2020 from the Employee's wages up to $270 per month for combined commuter highway vehicle transportation and transit passes. In this case, since no year was mentioned in the question, it has been assumed as 2020.

a. The amount of transit pass benefit to be included in gross income each year is as follows:

Benefit included  in gross income  = Worth of pass - Slab rate

Benefit included  in gross income  = $275 - $270

Benefit included  in gross income  = $5 * 12 month

Benefit included  in gross income  = $60 per year

b. The amount of parking benefit that LaMont must include in his gross income each year is as follows

Parking benefit included in gross income = Parking benefit provided by the company - Slab rate

Parking benefit included in gross income = Worth of pass - Slab rate

Parking benefit included  in gross income  = $275 - $270

Parking benefit included  in gross income  = $5 * 12 month

Parking benefit included  in gross income  = $60 per year.