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Circuits/IRS Split When It Comes to FICA Taxation of Severance Pay
Bloomberg BNA Link to more items from this source
Nov. 13, 2012
"Despite a Circuit conflict, the IRS continues to assert that all severance payments are wages subject to FICA taxation, unless they meet the narrowly-tailored definition of 'supplemental unemployment benefits' under existing IRS guidance. Such benefits are defined as payments on account of an employee's involuntary separation from employment that results directly from a reduction in force, the discontinuance of a plant or other similar conditions. In addition, the IRS requires that such severance payments not be made as a lump sum and specifically be designed to supplement state unemployment benefits that the individual is eligible to receive."

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