News & Events


On January 14, 2014, the Supreme Court heard oral arguments in United States v. Quality Store. This ongoing case questions whether severance payments made to employees whose employment was involuntarily terminated are considered wages and subject to tax under the Federal Insurance Contributions Act (FICA). The case had been previously heard from the US Court of Appeals for the Federal Circuit which held that "supplementary unemployment benefit" payments (SUB payments) are wages and are subject to FICA tax. Subsequently, the Sixth Circuit opposed this decision and held that the SUB payments are not subject FICA tax.

The Supreme Court is expected to issue their ruling sometime this year, possibly this summer. If they decide that an expanded class of severance payments should not be subject to the FICA tax, employers may receive a refund for FICA taxes previously paid. While the decision may not be upheld, employers, especially employers in the Sixth Circuit (Kentucky, Michigan, Ohio and Tennessee), should strongly consider filing a protective refunds claim with the IRS by April 15, 2014 to protect their potential refund with respect to the 2010 calendar year. A protective claim can be filed on Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund.

For more information or questions on this topic, please contact your local UHY LLP professional.