Short-week benefits remain subject to FICA tax

Plain-English summary

Chief Counsel considered whether benefits paid when employees worked fewer than 36 hours or could not work because of weather were excluded from FICA wages. The workers receiving these short-week payments did not qualify for state unemployment compensation. Chief Counsel agreed that the payments failed Rev. Rul. 90-72's narrow exception because they were not linked to receipt of state unemployment compensation. The payments therefore remained wages for FICA purposes.

Ruling snapshot

• Question: Are short-week benefits excluded from FICA wages as supplemental unemployment benefits?
• Outcome: Advice given, the benefits are not excluded from wages
• Key authorities: IRC § 3121; Rev. Rul. 90-72

Full text (IRS public release)

ID: CCA_2016080909000907
UILC: 3121.00-00, 3121.01-11

Number: 201634023
Release Date: 8/19/2016
From:
Sent: Tuesday, August 09, 2016 9:00:09 AM
To:
Cc:
Bcc:
Subject: RE: -------------- POSTF-123534-16

Hi--------–

You asked whether “short-week” benefits paid to workers who work less than 36 hours
in a week or who could not work due to weather are excluded from wages for purposes
of FICA tax as supplemental unemployment benefits described in Revenue Ruling 90-

72. You stated that under state law, an applicant for state unemployment compensation
    benefits must be “unemployed, able, available for, and actively seeking suitable full-time
    work.” Recipients of short-week benefits do not qualify for state unemployment
    compensation. Thus, these short-week benefits are not “linked to the receipt of state
    unemployment compensation” as required by Revenue Ruling 90-72. We agree with
    your conclusion that these” short-week “ payments are not excluded from wages for
    purposes of FICA tax because they do not satisfy the narrow exception set forth in Rev.
    Rul. 90-72. Your conclusion is also consistent with PLRs 200322012 and 9734035,
    which stated Automatic Short Week Benefits are wages for FICA and FUTA purposes,
    unless the benefits are made to individuals who otherwise qualify for excludable
    Regular Benefits (i.e., if the Automatic Short Week Benefits immediately precede or
    follow a week in which an employee receives Regular Benefits).

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