Contributions to governmental plan were subject to income and FICA taxes

A city’s contributions to a governmental retirement plan pursuant to a collective bargaining agreement were income to the participating employees. Under Rev. Rul. 67-351, 1967-2 CB 86, the contributions to the plan were regarded as constructive payments of compensation to the employees and, thus, the contributions were treated as made by the employees rather than by the employer. Moreover, the payments were wages for Federal Insurance Contributions Act (FICA) and federal income tax withholding purposes. (IRS Letter Ruling 201551006, Aug. 28, 2015.)

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