Tax Facts

3513 / Are amounts received under a cafeteria plan subject to Social Security and federal unemployment taxes?

Amounts received by participants, or their beneficiaries, under a cafeteria plan are not treated as wages. Thus, these amounts are not subject to tax under the Federal Insurance Contributions Act (FICA) or under the Federal Unemployment Tax Act (FUTA) if such payments would not be treated as wages without regard to the plan, and if it is reasonable to believe that IRC Section 125 would not treat any wages as constructively received.1

1. IRC §§ 3121(a)(5)(G), 3306(b)(5)(G).

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