Tax Type
Employer Income Tax Withholding
Individual Income Tax
Description
Qualified salary reduction contributions to a "cafeteria plan"
Topic
Subtractions and Exclusions
Withholding of Tax
Date Issued
12-31-1987
January 4, 1988
Re: Ruling Request: Individual Income Tax
Dear ******************
This is in reply to your letter of November 19, 1987, in which you request information concerning Virginia's treatment, for individual income tax purposes, of qualified salary reduction contributions to a "cafeteria plan" (IRC §125).
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 federal adjusted gross income, no withholding of Virginia income tax will be required.
If you have any further questions, please do not hesitate to call on me.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner