Client works for a company that gets government contract jobs. Brought in his stuff the other day and has a 1099-MISC with an entry in box 3. I called employer and was told this amount was for the health and welfare benefit fringe portion required to be paid on certain government contracts. I have looked through Pubs 15b, 17, and 525 and did not come up with a definite answer on tax treatment. This is the first time I have seen this and was hoping someone here could help me out on this one.
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I found this from Rev. Rul. 75-241:
“Payments to employees in lieu of health and welfare benefits. Amounts employees received directly from a government contractor, in satisfaction of the Service Contract Act requirement that health and welfare benefits or cash in lieu thereof be provided on a parity with those benefits prevailing in the locality constitute wages for purposes of the FICA, FUTA, and income tax withholding, and are includible in their gross income; Rev. Rul. 61-146 distinguished.”
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