If your organization or entity made severance payments to former employees in 2010, it may be wise to file a claim for refund of F.I.C.A. taxes with the Internal Revenue Service by April 15, 2014.
The United States Supreme Court is hearing arguments this month on the question of whether payments made by employers under a severance plan were subject to F.I.C.A. taxes as wages. The United States Sixth Circuit Court of Appeals decided in U.S. v. Quality Stores, Inc., 693 F.3d 605 (6th Cir. 2012), that wages paid under a severance plan due to a reduction in workforce were not wages subject to F.I.C.A. taxes. This decision is contrary to both IRS rulings and the decision by the Federal Circuit Court of Appeals in an earlier case, CSX Corp. v. U.S., 518 F.3d 1328 (Fed. Cir. 2008).
This tax alert outlines what employers outside of the 6th Circuit, including those in California, must file in order to receive a F.I.C.A tax refund for severance wages.