Toll Payments California

[pdcraft]

California non-profit. Hope to draw on the experience of payroll folks out there:

We have recently hired a new executive, and have agreed to pay for actual express lane tolls related to his normal commute to and from the office. I know I have seen this kind benefit before, but have no personal experience.

Question: Would you treat this as a true reimbursement subject only to organization policies, or would you classify it as a taxable benefit of some sort related to compensation?

This particular individual is NOT funded through Federal, or any other restricted sources, so no additional limitations there.

Thank you

[hr for me]

I would read through Publication 15B from the IRS on transportation benefits with no guessing whether it is taxable or not. If it's not a "qualified benefit", you can't make it non-taxable to the employee as a reimbursement. Your choice would more be whether to gross up at least the FICA tax on it. Honestly I wouldn't get into grossing it up as it is already a generous benefit, but it depends on what was negotiated and whether this executive expects to get taxed on it.

(Personally I don't see it falling under any of the qualified reasons at least for federal income tax purposes...I don't have an opinion on CA state income taxes since CA is not my state).

[eerelations]

I suspect that if these tolls occur during a business day, for example driving from the workplace to a client or from client to client, this would be seen as a normal business expense and therefore not taxable to the employee. (Just like employees aren't taxed for the value of the office supplies you give them to do their jobs.)

However, if these tolls occur outside of work, i.e., on the morning commute from home to work and/or on the evening commute from work to home (or wherever), then they would probably seen as a benefit and therefore taxable.

Caution: this is just my logic speaking, and as we all know, the IRS folk aren't always big on logic!