FICA for Foreign Housing Allowance

[Guest Kurt]

Any thoughts on whether an employer's payment of a housing allowance for a foreign assignment is includable as FICA wages, even though it is excludable from income tax under IRC 911? I believe it would constitute FICA wages, since I cannot find any applicable exclusion from the FICA wages definition. On the other hand, I have searched various IRS publications and instructions (other sources, too), and can find nothing in the affirmative. Thanks.

[Guest Harry O]

This seems to be an area that causes confusion. Amounts excludible from income under section 911 are clearly exempt from FIT. 3401(a)(8).

There is no similar statutory exclusion from FICA tax. Thus, it appears that these payments would be subject to FICA. The general rule is that all employer-provided payments are subject to FICA unless there is a specific exclusion. Moreover, Congress has expressly stated that the income tax withholding and FICA withholding provisions are to be interpreted separately. That is, just because something is exempt from FIT doesn't make it exempt from FICA.

Nevertheless, I am aware of some employers who take the position that 911 amounts are exempt from FICA. I think this is a losing argument but one never can tell what the outcome might be on audit . . .

(It is also an academic issue for most employers as most expats have other clearly FICA-able income that usually takes them over the wage base -- tax reimbursements, COLAs, foreign service premiums, education allowances, home leave, etc.)