The United States Supreme Court has issued its decision in United States v. Quality Stores, Inc., 12-1408, 2014 WL 1168968 (U.S. March 25, 2014), reversing the decision of the United States Court of Appeals for the Sixth Circuit. The Sixth Circuit had held that certain severance payments made to employees who were involuntarily terminated were not subject to taxes under the Federal Insurance Contributions Act (“FICA”). The Supreme Court found that there is no general exemption for severance payments from the definition of “wages” subject to FICA. See id. at 3-5. In particular, the Supreme Court noted that Internal Revenue Code section 3121(a)(13)(A) exempts severance payments made because of retirement for disability from FICA wages, and that “[t]hat exemption would be unnecessary were severance payments in general not within FICA’s definition of ‘wages.’” Id. at 3.
If your company had considered filing a refund claim for FICA taxes based on the Sixth Circuit’s decision in Quality Stores, you can now remove that item from your “to do” list.