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Tax Alert: US Supreme Court Rules Severance Pay Subject to FICA Taxes

March 26, 2014

This week, the U.S. Supreme Court confirmed that severance pay is subject to FICA tax. (Read the March 25th opinion).

There had been uncertainty about whether FICA taxes were due on severance payments following disparate circuit court rulings in two cases: CSX Corp. v. U.S. and U.S. v. Quality Stores.

The Court ruled in Quality Stores that, except in very narrow circumstances involving severance pay that is tied to the receipt of state unemployment benefits, severance pay is “wages” for FICA tax purposes.


Sue Odom is Member (Partner) at Nexsen Pruet in Columbia. She works focuses on tax and employee benefits by helping professionals with issues related to ERISA, employee benefits and executive compensation.