Posts Tagged: FICA

Severance Payments are FICA Wages

in Tax Issues, Wages

This morning the US Supreme Court issued a ruling providing that severance payments are taxable FICA wages. In United States vs. Quality Stores, Quality Stores made severance payments to employees who were involuntarily terminated as part of Quality Stores’ Chapter 11 bankruptcy. Quality Stores paid and withheld income and FICA taxes from the severance payments. Later, Quality Stores sought a refund on behalf of itself and former employees for FICA taxes withheld and paid. When the IRS did not allow the refund, Quality Stores initiated proceedings in Bankruptcy Court, which eventually reached the Supreme Court. After an exhaustive review of… Continue Reading