How do employees use pre-tax dollars for commuting expenses?

Dear Puzzled:
First off, let me tell you, Helen is a woman who knows what she doesn't know! Your best bet on this one is to introduce yourself to your organization's tax professionals and put the question to them. But here are a few basic facts to get you started.

The IRS now allows employees to use, via payroll deduction, up to $65 a month of pre-tax dollars to pay for transportation expenses, including bus, rail, ferry and vanpool. The benefit to the employer is savings on payroll taxes. The employee benefits from savings on both payroll and federal withholding taxes. The annual savings for employer and employee can add up, and the employee who uses one of these alternative commutes can realize even lower commuting costs!

King County Metro is publishing a nifty federal tax briefing booklet that will be ready after the first of the year. It covers a number of IRS regulations concerning commuting costs, including the new pre-tax dollars law, as well as information about tax-free fringe benefits, parking cash out, and the Washington State B&O Tax Credit.

To get a free copy, call 206-684-1621. Bone up on the information, then make an appointment with your tax professional to discuss the details and decide how your organization and employees can benefit. 
H.O.V.