Retailer's Severance Pay Not Subject To FICA Tax: 6th Circ.

Law360, New York (September 10, 2012, 10:25 PM EDT) -- The Sixth Circuit on Friday ruled that severance payments an agricultural retailer made to its workers after laying them off are in fact supplemental unemployment compensation benefits that are not taxable as wages under the Federal Insurance Contributions Act.

A three-judge panel upheld a lower court’s decision and found that because Congress has held that supplemental unemployment compensation benefits, or SUB payments, aren’t wages and are treated as such only for federal income tax withholding purposes, those paid by the retailer aren’t considered wages for FICA...
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