|
The
PERCs of PRE-PAYROLL TAX DEDUCTIONS for TRANSIT PASSES
ESTIMATES
OF SAVINGS FOR EMPLOYERS AND EMPLOYEES
Under Section
132(f) of the IRS code, an employer can allow its employees to pay
for transit or vanpooling out of their gross pay (pre-tax income).
The program costs nothing for an employer to participate, but in
fact, the program can save employers thousands of dollars in tax
related expenses.
For transit
or vanpools, employees can use up to $105 a month in pre-payroll
tax deductions to pay for these commutes. That is $1,200 a year
in non-taxable income. For St. Louis employees, a monthly transit
pass is $50. This means that an employee in St. Louis can set aside
$600 a year in pre-tax income for transit passes.
This lowers
employees' taxable income, which saves them on federal income and
payroll taxes. This saves the employer on payroll related taxes
as well.
For example,
if an employer had 100 employees who chose to take part in this
program in St. Louis, that would be $60,000 a year that the employer
did not pay payroll related taxes on as a company. This number becomes
even larger as the number of individuals participating grows.
The
Transit/Vanpool Benefit Programcan save companies time and money.
Many companies want to know just how much money.
Below are several
examples of actual dollar amounts calculated by Megargel & Company,
an accounting firm based in St. Louis, that could be saved by implementing
a Transit/Vanpool Benefit Program at a corporate worksite.
Several
assumptions are made including:
| Estimated
Annual Salary per Employee |
$30,000
|
| Annual
Salary Reduction is $50/MO for 12 months |
$600
|
| Percentage
of Employee's Salary- FICA taxes |
7.65%
|
| Percentage
of Employee's Salary - Plan contribution |
6.00%
|
| Percentage
of Employee's Salary - St. Louis City taxes |
0.50%
|
| Wrkrs.
Comp./Disab. Prems. as a % of salaries |
2.00%
|
|
Employees
marginal Income Tax Rate: Federal
|
15.00%
|
|
State
|
6.00%
|
|
City
|
1.00%
|
|
EMPLOYER
#1 with 50 employees
|
| |
WITHOUT
TBP
|
WITH
TBP
|
| #
of Participating Employees |
50
|
50
|
| Annual
Salary per Employee |
$30,000
|
$30,000
|
| Total
Annual Salary Before TBP Annual Salary Reduction |
$1,500,000
|
$1,500,000
|
| TBP
Annual Salary Reduction |
-
|
(30,000)
|
| Total
Annual Salary after TBP Annual Salary Reduction |
$1,500,000
|
$1,470,000
|
|
|
EMPLOYER
#2 with 100 employees
|
| |
WITHOUT
TBP
|
WITH
TBP
|
| #
of Participating Employees |
100
|
100
|
| Annual
Salary per Employee |
$30,000
|
$30,000
|
| Total
Annual Salary Before TBP Annual Salary Reduction |
$3,000,000
|
$3,000,000
|
| TBP
Annual Salary Reduction |
-
|
(60,000)
|
| Total
Annual Salary after TBP Annual Salary Reduction |
$3,000,000
|
$2,940,000
|
|
EMPLOYER
#3 with 500 employees
|
| |
WITHOUT
TBP
|
WITH
TBP
|
| #
of Participating Employees |
500
|
500
|
| Annual
Salary per Employee |
$30,000
|
$30,000
|
| Total
Annual Salary Before TBP Annual Salary Reduction |
$15,000,000
|
$15,000,000
|
| TBP
Annual Salary Reduction |
-
|
(300,000)
|
| Total
Annual Salary after TBP Annual Salary Reduction |
$15,000,000
|
$14,700,000
|
| Estimated
Annual Savings for Employer |
| |
Employer
#1 |
Employer
#2 |
Employer
#3 |
| Social
Security & Medicare Tax |
$2295
|
$
4590
|
$22,950
|
| Retirement
Plan Payments |
1,800
|
3600
|
18,000
|
| Insurance
Premium Reductions |
600
|
1200
|
6,000
|
| City
Tax Payments |
150
|
300
|
1500
|
|
Employer's
Annual Savings
|
$
4,845
|
$9,690
|
$48,450
|
| Estimated
Annual Savings for Employee |
| |
|
| Social
Security & Medicare Taxes |
$
46
|
| Income
Taxes (Federal/State/City) |
132
|
| Less:
Reduced Plan Payments |
(36)
|
|
Employee's
Annual Savings
|
$
142
|
|
