IRS releases 2024 inflation adjustments for fringe benefits and Form W-2/1099 information reporting penalties

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November 10, 2023
2023-1878

In Revenue Procedure 2023-34, the IRS announced the 2024 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 2024

Summarized below are the 2024 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 $2,800 (up from $2,650 in 2023) and not more than $4,150 (up from $3,950 in 2023)	Not less than $5,550 (up from $5,300 in 2023) and not more than $8,350 (up from $7,900 in 2023)
Annual out-of-pocket (other than for premiums)	Not to exceed $5,550 (up from $5,300 in 2023)	Not to exceed $10,200 (up from $9,650 in 2023)

Adoption assistance limit goes up in 2024

The limit on qualified adoption assistance (including benefits provided for special needs children) under IRC Section 137 for 2024 is $16,810, up from $15,950 in 2023.

For 2024, 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 $252,150 and is completely phased out for taxpayers with modified adjusted gross income of $292,150 or more.

Health flexible spending arrangement (FSA) limit goes up in 2024

The 2024 annual limit on pretax contributions employees can make toward their health FSA through a cafeteria plan under IRC Section 125(i) is $3,200, up from $3,050 in 2023.

If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $640, up from $610 in 2023.

Transportation fringe benefits (parking and transit) limit goes up in 2024

The 2024 monthly limit on parking benefits under IRC Section 132(f)(2)(B) is $315, up from $300 in 2023.

The 2024 aggregate monthly limit for transportation in a commuter highway vehicle and any transit pass under IRC Section 132(f)(2)(A) is also $315, up from $300 in 2023.

Foreign earned income exclusion for 2024

For taxable years beginning in 2024, the foreign earned income exclusion amount under IRC Section 911(b)(2)(D)(i) is $126,500, up from $120,000 in 2023.

Reporting penalties for Forms W-2/1099 increase for tax year 2024

The penalties that apply to late or incorrect Forms W-2 is indexed each year for inflation. On the following page are 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 2024 (filed in 2025).

IRC Section 6721: Failure to timely file an accurate information return with IRS (for returns required to be filed in 2025)
Filed/corrected on or after	On or before	Penalty	Maximum	Maximum small employer
1/1	1/31	$0	N/A	N/A
Day after deadline (in 2025, 2/3)	30 days after required filing date (in 2025, 3/3)	$60	$664,500	$232,500
31 days after deadline (in 2025, 3/3)	8/1	$130	$1,993,500	$664,500
8/2		$330	$3,987,000	$1,329,000
	intentional disregard	$660	no limit	no limit
IRC Section 6722: Failure to furnish correct payee statements (for statements required to be furnished in 2025)
Filed/corrected on or after	On or before	Penalty	Maximum	Maximum small employer
1/1	1/31	$0	N/A	N/A
Day after deadline (in 2025, 2/3)	30 days after required filing date (in 2025, 3/3)	$60	$664,500	$232,500
31 days after deadline (in 2025, 3/3)	8/1	$130	$1,993,500	$664,500
8/2		$330	$3,987,000	$1,329,000
	intentional disregard	$660	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)

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor