Uber & Lyft: Tax-free commuting options?
Question: We provide employees with tax-free commuter benefits, up to the statutory limit of $255 a month for 2017. An employee inquired about whether commuting via Uber or Lyft qualifies for the tax exclusion. We don’t know how to answer her.
Answer: Maybe, if the vehicle qualifies as a commuter highway vehicle: it seats at least six adults, not including the driver, and you expect that at least 80% of the vehicle’s use is for commuting. You must also consider how to value these rides, whether vouchers are readily available (if not, then you could reimburse employees in cash), and the mechanics of setting up pretax deductions. However, since this is such a new area, you would be wise to run this by the company’s tax pro.
On the other hand, employees who work overtime at night could use Uber or Lyft services to go home. In this case, Uber or Lyft would be no different from a car service.
Internet access: Taxable or not?
Question: To save on rent, our company is sending employees home to work. We’ll pick up employees’ internet access costs. To streamline the process, we’re thinking of just allowing employees to submit their monthly bills to us for reimbursement. Any problem with this?
Answer: Probably. Internet access will be a working condition, but employees must substantiate their business use. Employees’ personal use is fully taxable. Since bills from the cable company or other ISP are usually stable month-to-month, employees probably don’t have to submit bills every month. But they must substantiate their business use every month. If employees use their Internet access 85% for business, then 85% of their bill would be a working condition fringe benefit. Heads up: A flat reimbursement or allowance would be fully taxable.