FICA Taxes Severance Agreements

Federal Insurance Contribution Act (FICA) Taxes are United States federal payroll taxes levied to fund the Social Security and Medicare system. FICA Taxes burdens are divided between employers and employees and... more +
Federal Insurance Contribution Act (FICA) Taxes are United States federal payroll taxes levied to fund the Social Security and Medicare system. FICA Taxes burdens are divided between employers and employees and are currently set at 12.4% for Social Security and 2.9% for Medicare. less -
News & Analysis as of

Employment Alert

In This Issue: EEOC's Latest Target - Severance Agreements; Pennsylvania's Unemployment Compensation Law May Require Employers to Provide Response to Unemployment Information Requests; and Supreme Court Clarifies that...more

Monthly Benefits Update

As expected, the Department of the Treasury and the IRS (the “Agencies”) finalized the employer information reporting requirements under the Affordable Care Act (the “ACA”) earlier this month. The final rules, which are...more

Severance Payments are Taxable under FICA

On Tuesday, March 25, 2014, the U.S. Supreme Court ruled in favor of the Internal Revenue Service in a dispute over the payroll tax treatment of certain types of severance compensation....more

Severance Pay As Wages: Business As Usual

Confirming what most employers have long assumed to be true, this week the U.S. Supreme Court held that severance payments made to terminated employees are “wages” subject to the Federal Insurance Contributions Act (FICA) tax...more

Supreme Court Rules That Severance Payments Are Subject to FICA Taxes

The U.S. Supreme Court has unanimously held that payments of supplemental unemployment benefits (SUB payments) are taxable wages subject to FICA tax withholding. The Court’s decision in United States v. Quality Stores, Inc.,...more

Supreme Court Rules That Severance Payments Constitute “Wages” For FICA Tax Purposes

On Tuesday, March 25th, the Supreme Court ruled that severance payments not linked to State unemployment benefits paid to involuntarily terminated workers were "wages" and thus subject to Social Security and Medicare taxes...more

Is There Quality to the Argument That Severance Payments Are Not Taxable "Wages"? – Supreme Court Holds That Severance Payments...

Earlier this week, on March 25, 2014, the U.S. Supreme Court handed down a highly publicized decision in the case of United States v. Quality Stores. In Quality Stores, the Court unanimously held that the severance payments...more

The Advantages of Offering Supplemental Unemployment Benefits Instead of Severance, Part I: FICA Taxes and More

According to the Internal Revenue Service (IRS), severance is subject to Federal Insurance Contribution Act (FICA) tax and certain supplemental unemployment benefits are not....more

Sixth Circuit Holds that Severance Payments Are Not Subject to FICA Taxes

In United States v. Quality Stores, Inc., et al., the United States Court of Appeals for the Sixth Circuit recently held that severance payments qualified as supplemental unemployment compensation benefit (SUB) payments and...more

Government Challenges Sixth Circuit Decision in Quality Stores, Inc.

On October 18, 2012, the U.S. Department of Justice filed a petition for rehearing en banc in the Sixth Circuit Court of Appeals in United States v. Quality Stores, Inc., No. 10-1563 (September 7, 2012), asking the full court...more

Sixth Circuit Nixes FICA Tax on Severance Pay

The U.S. Court of Appeals for the Sixth Circuit has affirmed a Michigan Bankruptcy Court and approved a taxpayer’s request for a refund of FICA taxes paid on behalf of former employees. Quality Stores et al....more

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