Severence Pay Subject To FICA Taxes, US Tells High Court

Law360, Washington (January 14, 2014, 6:57 PM EST) -- The U.S. government asked the U.S. Supreme Court on Tuesday to rule that involuntary termination payments to workers are taxable as wages under the Federal Insurance Contributions Act, urging reversal of a Sixth Circuit decision that could force the Internal Revenue Service to issue $1 billion in tax refunds.

The government told the high court at oral argument that the Sixth Circuit had wrongly affirmed a decision that severance payments made by bankrupt Quality Stores Inc. were not taxable under FICA.

“The payments in this case...
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