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Refunds May Be Available for Taxpayer’s that Paid FICA Taxes on Severance Payments



Based on a case that is currently being decided by the Supreme Court, taxpayers may be eligible for a refund of FICA taxes previously paid on severance payments.


On January 14, 2014, the Supreme Court heard oral arguments in United States v. Quality Stores Inc. to determine whether supplemental unemployment benefits paid to laid-off employees are “wages” for purposes of the FICA tax. The Court of Appeals for the Sixth Circuit held that severance payments that qualified as supplemental unemployment compensation benefits were not subject to FICA taxes. The Supreme Court’s decision in this case will resolve a current split that exists between the Sixth and Federal Circuit Courts.

Taxpayers that believe they may be eligible for a refund for severance payments made in 2010 must file Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, by April 15, 2014.

What Does CohnReznick Think?
If you paid the FICA tax on wages paid through any supplemental unemployment benefit to laid-off employees in 2010, careful consideration should be paid to whether filing a protective claim for refund should be filed. Taxpayers who had lay-offs through business combinations are very likely to have made these payments.


For more information, please contact Ken Kanter, Managing Partner of Tax Services, at 973-364-6668.

To learn more about CohnReznick’s Federal Tax Practice, please visit our webpage.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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