Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: October 18, 2013
The Firm
201-896-4100 info@sh-law.comThe U.S. Supreme Court has agreed to explore whether companies and employees must pay Federal Insurance Contributions Act (FICA) taxes on severance compensation. The results of the ruling could force the U.S. Department of Treasury to pay out roughly $1 billion in tax refund claims.
The case centers around a dispute between bankrupt Quality Stores Inc. and the Internal Revenue Service. The company, which went under in 2001 and closed all 300 of its stores, was forced to lay off 3,100 workers. However, Quality Stores made severance payments to each laid-off worker and paid FICA taxes on the amounts. In 2002, the company claimed a $1.1 million refund with the IRS for the taxes paid, arguing that severance payments do not count as wages, and are therefore not subject to payroll taxes.
Employers and employees each pay 6.2 percent in Social Security taxes on wages, and some of the refund money – if awarded – will go to employees, who allowed the company to lobby for the funds on their behalf. The IRS disagreed with the claims and refused to distribute refunds. “The severance payments at issue here are clearly ‘wages’ for FICA purposes,” the government said in an August filing, according to Reuters. The tax law case is particularly important, as Americans continue to be laid off and may be unsure of their tax obligations when it comes to severance, paid-out PTO days, and bonuses. The IRS currently defines wages broadly to include compensation for services of any type for FICA tax purposes, Bloomberg notes.
Therefore, if the Supreme Court chooses to place restrictions on this law, the Treasury Department may face a barrage of refund claims from companies and employees who previously made FICA payments on severance packages after being laid off.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
Author: Brian D. Spector
Business partnerships, much like marriages, function exceptionally well when partners are aligned but can become challenging when disagreements arise. Partnership disputes often stem from conflicts over business strategy, financial management, and unclear role definitions among partners. Understanding Business Partnership Conflicts Partnership conflicts place significant stress on businesses, making proactive measures essential. Partnerships should establish detailed […]
Author: Christopher D. Warren
*** The original article was featured on Bloomberg Tax, April 28, 2025 — As a tax attorney who spends much of my time helping people and companies who have large, unresolved issues with the IRS or one or more state tax departments, it often occurs to me that the best service that I can provide […]
Author: Scott H. Novak
On January 28, 2025, the Trump Administration terminated Gwynne Wilcox from her position as a Member of the National Labor Relations Board (NLRB or the Board). Gwynne Wilcox, a union side lawyer for Levy Ratner, was confirmed to the Board for an original term in 2021 and confirmed again for a successive five-year term expiring […]
Author: Matthew F. Mimnaugh
Breach of contract disputes are the most common type of business litigation. Therefore, nearly all New York and New Jersey businesses will likely have to deal with a contract dispute at least once. Understanding when to file a breach of contract lawsuit and how long you have to sue for breach of contract is essential […]
Author: Brittany P. Tarabour
Closing your business can be a difficult and challenging task. For corporations, the process includes formal approval of the dissolution, winding up operations, resolving tax liabilities, and filing all required paperwork. Whether you need to understand how to dissolve a corporation in New York or New Jersey, it’s imperative to take all of the proper […]
Author: Christopher D. Warren
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!