Legal Alert: Supreme Court Decides Severance Not Exempt from FICA

Executive Summary: On March 25, 2014, the United States Supreme Court unanimously held that certain severance payments (described as “supplemental unemployment compensation benefits” or “SUBs”) constituted taxable wages for purposes of FICA. See United States v. Quality Stores, Inc. No. 12-1408 (2014). The Sixth Circuit had held that the payments were not wages subject to FICA, in a decision from which the IRS appealed. See In re Quality Stores, Inc., 693 F. 3d 605 (6th Cir. 2012).