Tax Type
Employer Income Tax Withholding
Description
Salary reduction benefits
Topic
Withholding of Tax
Date Issued
06-08-1987
June 24, 1987
Ruling Request: Withholding and Individual Income Tax
Dear ***********************
This will reply to your letter of May 28, 1987 concerning applicability of Virginia withholding and income tax laws to qualified salary reduction benefits provided under I.R.C. §125.
You ask whether benefits elected by salary reduction under I.R.C. §125 are recognized as tax excluded benefits for. income tax purposes in Virginia. Federal adjusted gross income is the starting point for determining an individual's Virginia adjusted gross income and Virginia taxable income. Accordingly, those salary reduction benefits that are excluded from federal adjusted gross income are similarly excluded from Virginia adjusted gross income. Conversely, salary reduction benefits included in federal adjusted gross income would be included in Virginia adjusted gross income. The Code of Virginia is silent on whether salary reduction benefits are subject to withholding tax. However, because Virginia is a conformity state, if at the time the salary reduction benefits are received the employer reasonably believes the employee will be allowed to exclude them from gross income, no withholding of Virginia income tax will be required.
Virginia has no special reports or any qualification requirements for cafeteria plans other than those set forth by the federal government.
The only taxes deducted from Virginia paychecks are federal and state income tax and federal social security tax.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner