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Showing 3 posts in severance pay.

Severance Payments are Wages Subject to FICA Taxes

On March 24, 2014, the U.S. Supreme Court held in United States v. Quality Stores, Inc., 572 U.S. ____ (2014), No. 12-1408, that severance payments made to employees terminated in connection with a company’s Chapter 11 bankruptcy plan are taxable wages under the Federal Insurance Contributions Act (FICA). The ruling resolves a split among federal circuits and affects all employers who provide severance pay. More >

Severance Packages and Unemployment Benefits

As an employer, one of the most difficult parts of the job can be letting an employee go or eliminating their position. When the departure is an amicable one, many employers choose to provide a severance package. In some cases, an employment contract or union agreement may require severance pay no matter how the relationship ends.

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Employers’ deadline to file protective claim for 2009 FICA taxes is April 15, 2013

On September 7, 2012, the Sixth Circuit of Appeals (which encompasses Michigan, Kentucky, Ohio and Tennessee) held in United States v. Quality Stores, Inc. that severance payments to former employees pursuant to an involuntary reduction in work force are not taxable “wages” for purposes of Medicare and Social Security withholding under the Federal Insurance Contributions Act (“FICA”).[1] This affirmed the earlier decision by the Western District Court of Michigan. [2] More >

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