News & Analysis as of September 20, 2024

FICA Taxes › Severance Agreements › Internal Revenue Service

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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 -

Tax Pitfalls To Avoid In Employment Litigation Settlements

Flaster Greenberg PC on 6/16/2023

By all measures, 2021 was a banner year for hiring, but 2022 and 2023 have been the opposite. According to one media source, more than 121,000 jobs in the technology sector alone — think Google LLC, Amazon.com Inc.,...more

How Do I Report Non-Qualified Plan or Severance Payments to a Former Employee? Hint: You Should Probably Use a W-2, Not a 1099!

Foley & Lardner LLP on 7/10/2018

Employers commonly make payments to former employees for a number of reasons. Two of the more routine payments are those from a non-qualified deferred compensation plan (such as payments from a supplemental executive...more

Monthly Benefits Update

Franczek P.C. on 4/3/2014

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

Sheppard Mullin Richter & Hampton LLP on 3/31/2014

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

Ervin Cohen & Jessup LLP on 3/31/2014

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

Ballard Spahr LLP on 3/31/2014

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

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

Ogletree, Deakins, Nash, Smoak & Stewart,... on 8/27/2013

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

Government Challenges Sixth Circuit Decision in Quality Stores, Inc.

Ogletree, Deakins, Nash, Smoak & Stewart,... on 11/5/2012

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

Dickinson Wright on 10/22/2012

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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