The Supreme Court has yet to issue a ruling in the Quality Stores case to decide whether supplemental unemployment compensation benefit payments—a term which includes severance pay—should be subject to FICA taxes. We have reported on the Quality Stores case in several previous blog posts and client alerts (see here, here and here). It is uncertain how the Supreme Court will rule in Quality Stores and a decision is expected in June 2014.
In the interim, employers who paid FICA taxes on severance pay on a 2010 employment tax return should consider filing a protective refund claim by April 15, 2014 to ensure that they receive a refund of the FICA tax that they paid in the event that the Supreme Court ultimately decides that severance pay should not be subject to FICA tax. A protective claim is filed on Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund. If you have any questions, please contact one of the authors or any of the tax attorneys at Thompson & Knight.