MoCo Partner: What's Next for Taxation of Severance Payments

Recently, Alan Levine, co-chair of Morrison Cohen's Compensation, Benefits and Employment Department, was quoted in a Law 360 article that surveyed reactions to the recent U.S. Supreme Court ruling in US. v. Quality Stores Inc. The case addressed the question of whether certain severance payments made to employees are subject to FICA taxation.  “Today's Supreme Court ruling in Quality Stores is a win for the IRS,” commented Levine. “The Court held that severance other than where paid pursuant to a 'supplemental unemployment benefits' plan (where payments are tied to state unemployment benefits) is subject to FICA taxation,” he continued.  But, “still unresolved is whether severance that is paid under a 'SUB' plan is exempt from FICA taxation. The IRS has previously held that it is not, but may now desire to reconsider the issue.” To learn more about how the Supreme Court's ruling will affect your business, please contact Mr. Levine at (212) 735-8694 or alevine@morrisoncohen.com.