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November 18, 2021
2021-2111

IRS releases 2022 inflation adjustments for fringe benefits and Form W-2/1099 information reporting penalties

In Revenue Procedure 2021-45 the IRS announced the 2022 inflation adjustments that will apply to certain fringe benefits and to Form W-2/1099 information reporting penalties.

Medical Savings Account (MSA) limits go up in 2022

Summarized below are the 2022 limits that apply to MSAs under IRC Section 220(c)(2)(A).

Provision

Self-only coverage

Family coverage

High deductible health plan: annual deductible

Not less than $2,450 (up from $2,400 in 2021) and not more than $3,700 (up from $3,600 in 2021)

Not less than $4,950 (up from $4,800 in 2021) and not more than $7,400 (up from $7,150 in 2021)

Annual out-of-pocket (other than for premiums)

Not to exceed $4,950 (up from $4,800 in 2021)

Not to exceed $9,050 (up from $8,750 in 2021)

Adoption assistance limit goes up in 2022

The limit on qualified adoption assistance (including benefits provided for special needs children) under IRC Section 137 for 2022 is $14,890, up from $14,440 in 2021.

For 2022, the amount excludable from an employee's gross income begins to phase out under IRC Section 137(b)(2)(A) for taxpayers with modified adjusted gross income of more than $223,410 and is completely phased out for taxpayers with modified adjusted gross income of $263,410 or more.

Health flexible spending arrangement (FSA) limit goes up in 2022

The 2022 annual limit on pretax contributions employees can make toward their health flexible spending arrangement through a cafeteria plan under IRC Section 125(i) is $2,850, up from $2,750 in 2021.

Transportation fringe benefits (parking and transit) limit goes up in 2022

The 2022 monthly limit on parking benefits under IRC Section 132(f)(2)(B) is $280, up from $270 in 2021.

The 2022 aggregate monthly limit for transportation in a commuter highway vehicle and any transit pass under IRC Section 132(f)(2)(A) is also $280, up from $270 in 2021.

Foreign earned income exclusion for 2022

For taxable years beginning in 2022, the foreign earned income exclusion amount under

IRC Section 911(b)(2)(D)(i) is $112,000, up from $108,700 in 2021.

Reporting penalties for Forms W-2/1099 increase for tax year 2022

The penalties that apply to late or incorrect Forms W-2 is indexed each year for inflation. The chart below shows the penalties that apply to late or incorrect Forms W-2 required to be furnished to employees and/or filed with the Social Security Administration for tax year 2022 (filed in 2023).

IRC Section 6721: Failure to timely file an accurate information return with IRS (for returns required to be filed in 2023)

Filed/corrected

on or after

And

on or before

Penalty

Maximum

Maximum small employer

1/1

1/31

$0

N/A

N/A

2/1

2/28

$50

$588,500

$206,000

3/1

8/1

$110

$1,766,000

$588,500

8/1

 

$290

$3,532,500

$1,177,500

 

Intentional disregard:

$580

no limit

no limit


IRC Section 6722: Failure to furnish correct payee statements (for statements required to be furnished in 2023)

Filed/corrected

on or after

And

on or before

Penalty

Maximum

Maximum small employer

1/1

1/31

$0

N/A

N/A

2/1

2/28

$50

$588,500

$206,000

3/1

8/1

$110

$1,766,000

$588,500

8/1

 

$290

$3,532,500

$1,177,500

 

Intentional disregard

$580

no limit

no limit

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
Compensation and Benefits Group
   • Christa Bierma (christa.bierma@ey.com)

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