An IRS letter provides guidance about the tax consequences of certain employer-provided transportation benefits, including smart card-provided transit passes and qualified parking.

Employers may provide employees with tax-free transportation on a mass-transit system by using transit passes up to $230 per month, while employers that make cash reimbursements for qualified parking by crediting the reimbursed amounts onto employees' smart cards must establish a "bona fide reimbursement arrangement," IRS said.

The amount paid through a salary supplement or a salary reduction arrangement is excluded from employees' income and wages for federal tax purposes if the payment is used exclusively to fund qualified transportation fringe benefits, IRS said.

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