Supreme Court to Consider Tax Treatment of Severance Payments

The U.S. Supreme Court has agreed to consider whether severance payments made to employees who are terminated are subject to Social Security and Medicare taxes (“FICA” taxes). In United States v. Quality Stores, Inc., No. 10-1563 (6th Cir. Sept. 7, 2012), the U.S. Court of Appeals for the Sixth Circuit affirmed a district court ruling that severance payments were not wages subject to FICA taxes. The Internal Revenue Service (IRS) requested review.