Severance Pay Taxable Under FICA, Feds Tell High Court

Law360, New York (June 10, 2013, 5:01 PM EDT) -- The federal government has urged the U.S. Supreme Court to review a ruling that severance payments made to laid-off workers are not taxable as wages under the Federal Insurance Contributions Act, saying the decision was based on a misunderstanding of tax law.

According to the government’s petition, filed May 31, the Sixth Circuit’s September decision had wrongly held that under a clause in the Internal Revenue Code, severance payments serve not as wages but as supplemental unemployment compensation benefits, or SUB, making them exempt from FICA....
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