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US Court Rules Severance PayNot Subject toEmplyment Tax.....

MMC

MMC

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WASHINGTON (Reuters) - In a tax decision that could have wide business implications, a U.S. appeals court ruled on Friday that employment taxes should not have been imposed on severance pay in an involuntary layoff.

The issue - one that has been is dispute for years - could end up before the Supreme Court because there is a split between appeals courts over it, Toro said.

The 6th Circuit judges admitted their ruling created a conflict. "We acknowledge that this issue of statutory construction is complex and that the correct resolution is far from obvious," said Judge Jane Stranch in the court's opinion.

"While the Supreme Court may ultimately provide us with the correct resolution ... only Congress can clarify the statutes concerning the imposition of FICA tax," the court said.

The case is: United States v. Quality Stores Inc, No. 10-1563.....snip~

U.S. court rules severance pay not subject to employment tax - Yahoo! News
 
MMC said:
WASHINGTON (Reuters) - In a tax decision that could have wide business implications, a U.S. appeals court ruled on Friday that employment taxes should not have been imposed on severance pay in an involuntary layoff.

The issue - one that has been is dispute for years - could end up before the Supreme Court because there is a split between appeals courts over it, Toro said.

The 6th Circuit judges admitted their ruling created a conflict. "We acknowledge that this issue of statutory construction is complex and that the correct resolution is far from obvious," said Judge Jane Stranch in the court's opinion.

"While the Supreme Court may ultimately provide us with the correct resolution ... only Congress can clarify the statutes concerning the imposition of FICA tax," the court said.

The case is: United States v. Quality Stores Inc, No. 10-1563.....snip~

U.S. court rules severance pay not subject to employment tax - Yahoo! News
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I agree with the ruling...within limits. Golden Parachutes aside, I think severance pay should not be subject to FICA. Ordinary income tax? Absolutely. FICA, no.
 
MaggieD said:
I agree with the ruling...within limits. Golden Parachutes aside, I think severance pay should not be subject to FICA. Ordinary income tax? Absolutely. FICA, no.
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At what point is severance pay considered a golden parachute?
 
Hmmm. I guess I will be able to refile and get a refund if SCOTUS rules the same.
 
Deuce said:
At what point is severance pay considered a golden parachute?
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Good question. I'm not sure I know. But, wait a minute! I just had a thought. YES, they should have to pay FICA on it up to the maximum -- which is $100,000 income, thereabouts, I believe. I've changed my mind. Sorry, I do that now and then...I'm really a blonde. ;)
 
MaggieD said:
Good question. I'm not sure I know. But, wait a minute! I just had a thought. YES, they should have to pay FICA on it up to the maximum -- which is $100,000 income, thereabouts, I believe. I've changed my mind. Sorry, I do that now and then...I'm really a blonde. ;)
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You can't do that. It violates the equal protection clause.
 
MaggieD said:
Can't do what? My first idea about the Golden Parachutes. Or keep my hair blonde?
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Charge taxes on one group of people, but not another.

It's why Obama's brilliant idea to put a 50% tax on bonuses trickled all the way down to the gorcery store cashier's Christmas bonus.
 
apdst said:
Charge taxes on one group of people, but not another.

It's why Obama's brilliant idea to put a 50% tax on bonuses trickled all the way down to the gorcery store cashier's Christmas bonus.
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Uhh, her suggestion would be that all severance payments be subject to the same FICA tax structure. What groups are being differentiated?
 
Deuce said:
Uhh, her suggestion would be that all severance payments be subject to the same FICA tax structure. What groups are being differentiated?
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Yu have to apply the law equally. You can't charge FICA tax on some folks and not others. It's called, "equal protection under the law".
 
I see no compelling reason why severance pay should receive special tax status versus regular income. It also creates the potential for exploitation with false "layoffs" as a means of tax evasion.
 
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