Tax Type
Employer Income Tax Withholding
Description
Dependent care assistance payments; Sick and disability pay
Topic
Withholding of Tax
Date Issued
06-27-1989
June 27, 1989
Re: Ruling Request - Withholding
Dear*****************
This is in reply to your letter dated May 11, 1989 in which you requested a ruling regarding the Virginia income tax withholding requirements related to several types of income.
Dependent Care Assistance Payments
The Code of Virginia contains no specific reference as to whether amounts paid or incurred by an employer for dependent care assistance provided to an employee pursuant to a qualified nondiscriminatory plan are excluded from the employee's gross income and thus exempt from income tax withholding. However, Virginia is a conformity state, and those dependent care assistance payments that are excluded from federal adjusted gross income are similarly excluded from Virginia adjusted gross income. Accordingly, if at the time the payments are made the employer reasonably believes that the employee will be allowed to exclude such payments from gross income, no withholding of Virginia income tax will be required.
Sick and Disability Pay
The Code of Virginia contains no specific reference to the taxation of "sick and disability pay." Because Virginia is a conformity state, to the extent any amounts received as "sick and disability pay" are included in federal adjusted gross income, such amounts would be included in Virginia adjusted gross income. Therefore, Virginia income tax withholding is required in cases where federal income tax withholding is required. Similarly, Virginia will permit voluntary withholding in cases where federal voluntary withholding is permitted.
Pensions, Annuities and Retirement Pay
Generally, Virginia imposes no reporting or withholding requirements on payors of retirement payments. However, if the recipient of a retirement payment wishes to have Virginia income tax withheld, and the payor agrees to voluntarily remit the withholding payments, the department will accept and process any such payments. Payors who voluntarily agree to submit income tax withholding are subject to the same accounting and reporting requirements as other payors of income tax withholding.
Effective for taxable years beginning on and after January 1, 1989, Virginia law provides a subtraction from federal adjusted gross income of up to $16,000 in retirement income for each taxpayer aged 55 and over. This subtraction is based upon a taxpayer's total retirement income from all sources. Attached is a summary of the provisions of this recently enacted law. Currently, the department is in the process of promulgating emergency regulations to implement this retirement income subtraction. Recipients of retirement income should consider the subtraction allowed under this new law in making the decision to request voluntary withholding from the payor of their retirement income.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner