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United States v. Quality Stores, Inc., 2012 U.S. App. LEXIS 18820 (6th Cir. Sept. 7, 2012)

Articles Discussing Case:

Supreme Court Justices Consider Taxability of Certain Severance Pay During Quality Stores Oral Arguments

Ogletree Deakins • January 16, 2014
Yesterday the Supreme Court of the United States heard oral arguments in United States v. Quality Stores, Inc., a case on appeal from the Sixth Circuit Court of Appeals. A circuit court split had spurred the Court to hear the case to decide whether certain severance payments made to employees whose employment is involuntarily terminated are taxable under the Federal Insurance Contributions Act (FICA).

Sixth Circuit Decision Offers FICA Tax Refund Opportunities for Severance Pay 09/11/2012

Ogletree Deakins • September 12, 2012
Any employer that implemented reductions in force or layoffs after 2008 should consider filing refund claims for the Federal Insurance Contribution Act (FICA) taxes paid on severance benefits based on a recent Sixth Circuit Court of Appeals decision. In United States v. Quality Stores, Inc., No. 10-1563 (September 7, 2012), the Sixth Circuit held that severance payments paid to employees pursuant to an involuntary reduction in force were not “wages” for FICA tax purposes.

Sixth Circuit Affirms that Severance Is Not "Wages" Subject to FICA, Creating Circuit Split

Littler Mendelson, P.C. • September 12, 2012
In United States v. Quality Stores, Inc., 2012 U.S. App. LEXIS 18820 (6th Cir. Sept. 7, 2012), the Sixth Circuit Court of Appeals affirmed a district court ruling that severance payments were not wages subject to Social Security and Medicare taxes ("FICA" taxes). The decision sets up an explicit conflict with a decision of the Court of Appeals for the Federal Circuit that will likely require congressional action or Supreme Court review to resolve. Based on the circuit split, employers should remain hesitant to stop reporting FICA on severance payments until a more conclusive outcome is reached. Any employer that has paid severance in recent years should also consider filing protective refund claims with the IRS in order to preserve its rights.