Costs & IMPUTED TAXES
Pass Travel Costs on United
1) Retirees must pre-pay any service charges, departure taxes, and customs fees when listing. Visit employeeRES>Quick Links>Pass Calculator to see a cost breakdown of each segment.
NOTE: Departure taxes leaving Belize, Colombia, Honduras, Mexico & Panama must be paid to a United rep at the airport
2) Retirees will pay Imputed taxes, if applicable, annually to the IRS via their Federal Tax Return.
Info and examples: FlyingTogether>Travel> Service Charges (under Travel Policies).
1) Service Charges
Costs when using a VACATION PASS:
ALL retirees and their eligible pass riders fly "service charge waived" in all cabins system-wide. That means FREE! However, any applicable departure taxes, customs fees, etc. must be pre-paid.
Costs when using a PERSONAL PASS:
Retirees with 25+ years of service fly "service charge waived" in all cabins system-wide! Ditto for their eligible pass riders (whether accompanied or not); sweet deal. But, on international flights there are departure taxes, customs fees, etc. everyone must pay.
Retirees with less than 25 years of service fly "service charge waived" system-wide in Economy; however, they pay service charges for premium cabins (BC & FC) system-wide; (plus any departure taxes, fees, etc). Ditto for their eligible pass riders (whether accompanied or not). Applicable service charges are 10% of ZED fare on domestic flights, 50% of ZED fare on international flights.
Retirees must Pre-pay with credit card (employees pay via payroll deduction):
employeeRES requires retirees listing for flights pre-pay with a credit card, unless the trip is completely free. It will show the amount owed and you should WRITE IT DOWN! When you pay with your credit card the cost changes to "0" and your email receipt says “0”. To see a breakdown of costs, taxes, etc. click on the little blue “i” button, on the top right of the payment page. For security, employeeRES will not remember your credit card number, you must input it every time.
If listing with the United app, your credit card will be charged before listing is complete.
If your plans change, CANCEL your listing in employeeRES before departure time and your credit card may be refunded automatically. If you cancel after flight departure you will have to request a refund. If you list in a premium cabin and it's full, you should be automatically boarded in lower cabins; if you paid for a premium cabin, your cc may not be automatically credited, so keep your boarding pass!
Write down your employeeRES payments & track your credit card charges on United.
Go to employeeRES>QuickLinks>Request Refund
Or call United Customer Care: 800-864-8331
For disputes: contact Employee Travel Center: firstname.lastname@example.org or call 877-825-3729 (input employee # and last 4 of SS#) then option 1 for ETC, then opt 4 to speak with a live person.
2) Imputed Taxes (aka "Pass Tax Value") Updated 01/30/2017
Info and examples: FlyingTogether>Travel> Service Charges (pages 6 & 7).
Background information: Before the new pass travel policy took effect in March 2012, United retirees may not have paid a lot of imputed taxes because service charges on that travel offset the taxes. Now, many pass riders fly “service charge waived” system-wide, so imputed taxes can add up fast.
The U.S. government deems pass travel by certain pass riders as a “taxable benefit"; which triggers "imputed taxes". They accrue whenever your taxable pass riders use personal passes or vacation passes.
Effective 1/1/2017, the "taxable value" of that travel equals the ZED medium economy fare of that segment, minus any service charges** paid.
Note: Departure taxes, customs fees, duties, etc. cannot be deducted; only service charges** paid can be deducted.
Example: Currently the ZED medium fare from SFO to KOA is $59 . If your taxable pass rider paid a service charge to sit in a premium cabin on that flight, then the Pass Tax value would be $59 minus the svc charge. If the svc charge was more than $59, then no taxes would accrue.
ZED fares are based on mileage & can change every year.
For a current ZED fare chart on FlyingTogether, click HERE.
By law, United must keep track of each employee/retiree's "Pass Tax Value". If your "taxable pass riders" accrue $600 or more "Pass Tax Value" in a year, then United must issue a 1099-MISC form and you must declare that value on your tax return as income.
What gets taxed? Pass travel by the retiree's "taxable pass riders": domestic partner, enrolled friends and non-dependent children after age 18 or 23 (if attending school). Employees also pay tax on buddy travel.
What does NOT get taxed? Pass travel by "non-taxable pass riders": the retiree, spouse, parents and dependent children < 26 yrs old.
How is the "pass tax" computed? It is the ZED medium economy fare on every flight flown during the fiscal year by your taxable pass riders, minus any svc charges** paid.
NOTE: United's Fiscal Year is November 1st to October 31st.
To see the “pass tax value" per segment, go to employeeRES > Quick Links > Pass Calculator and fill in the segments (SFO-KOA=$59). The “Estimated Tax Withholding” amount displayed (SFO-KOA= $22.80) is a rough estimate of what you would pay the IRS for that segment, if your riders reach an annual threshold of $600.
Who pays the IRS? YOU do (the retiree); but only if $600 or more Pass Tax Value is accrued in a fiscal year. You must declare the "Pass Tax Value" on the 1099 as income on your income tax return. NOTE: You will not have to pay the entire "Pass Tax Value" to the IRS; add it to the other income on your tax return and then calculate your new tax bill. Example: If the 1099 states your pass tax value is $1,000 and you are in the 28% tax bracket, you might pay an additional ~$280. Scroll down to How much will you have to pay the IRS due to "imputed taxes"? at the bottom of this page.
For employees: "Estimated withholding taxes" are taken out of their paychecks based on the "pass tax values" that have accrued. When filing their tax returns, employees may not have to pay any additional taxes because they were already withheld during the year; this is reflected on their W-2 form.
For retirees: United will send a 1099-MISC form to each retiree whose “taxable pass riders” together accrued a total of $600 or more "pass tax value" in the last fiscal year (Nov 1st thru October 31st). The total "Pass Tax Value" will be in Box 3 on the 1099 and the forms should be mailed by United by January 31st; allow 10 business days to receive yours. If you do not receive a 1099-MISC from United it means your pass riders did not accrue $600 or more total "pass tax value” during that period, so you do not owe the IRS any imputed taxes.
IMPORTANT: To make sure the 1099-MISC is correct, retirees should obtain their Pass Travel Report online by clicking the blue "Pass Travel Report” box on the FlyingTogether>Travel page. For 2016 info, input the date range November 1, 2015 to October 31, 2016. Use the tiny arrows at the top of the report to view multiple pages. Click the small symbol at the top of the page to download a copy of the report in the format you desire (pdf, etc.). You will see where each of your pass riders flew by dates.
Adding up all the "Pass Tax Value" amounts on the left side of the Pass Travel Report should equal the amount on your 1099. If they don't match, read on...
Pass Travel Report amounts do not match your 1099-MISC?
If you still have a discrepancy about the amount in box 3 on your 1099:
E-mail email@example.com, put “2016 1099” in the subject line and include the following in the body of the email: retiree name, retiree ID number, ticket details (ticket #, date of travel, passenger name) and any comments/questions.
How much will you have to pay the IRS due to "imputed taxes"?
That will depend on how much travel your taxable pass riders did, your applicable Federal and State tax rates, your tax bracket and your other income.
To obtain a rough ESTIMATE, add up the "Tax Withholdings" amounts on the right side of the Pass Travel Report. This estimate is based on state income tax (if applicable), 7.65% FICA and 25% Federal tax; your rates may vary.
A more accurate estimating method is to complete your taxes including the 1099 imputed income United sent, then do your taxes again without that imputed income; the difference in tax-owed = what your pass riders’ travel actually cost you. Then you can either ask your pass riders for the $$$ ...or not.
** Service charges: Retirees with less than 25 years of service and their eligible pass riders pay service charges for pass travel in premium cabins. See the “Service Charges” link in FlyingTogether>Travel.
Compiled by Kirk Moore, RAFA Travel Benefits Committee