US Supreme Court Rules Severance Pay Subject to FICA Taxes

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This week, the U.S. Supreme Court confirmed that severance pay is subject to FICA tax. (Read the March 25th opinion).

There had been uncertainty about whether FICA taxes were due on severance payments following disparate circuit court rulings in two cases: CSX Corp. v. U.S. and U.S. v. Quality Stores.

The Court ruled in Quality Stores that, except in very narrow circumstances involving severance pay that is tied to the receipt of state unemployment benefits, severance pay is “wages” for FICA tax purposes.


 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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