Severance Payment/FICA Contributions

The U.S. 6th Circuit Court of Appeals (covering Kentucky) has ruled that payments made under a Severance Agreement are not taxable because they are actually supplemental unemployment compensation which is itself, not taxable.

Employers who have withheld FICA contributions would be entitled to seek a refund from the IRS and presumably employees paying taxes on Severance Payments would also be able to seek refunds.

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