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Supreme Court Decides Severance Payments Are Subject to FICA

The payments in question were severance payments to employees who were involuntarily terminated as part of a Chapter 11 bankruptcy.  The Supreme Court held that wages are defined broadly as all remuneration for employment.  Furthermore, the payments in this case varied according to the employee’s function and seniority.  Since they are classified as wages, they are subject to FICA (Federal Insurance Contributions Act).  The taxpayer did not prevail on its argument that severance payments were supplemental unemployment benefit payments.


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