CPA & Business Advisory Blog

Supreme Court Shuts Down Potential 2010 Employment Tax Refund Opportunity

In an update to my earlier blog, “Learn How You May Qualify for an Additional Tax Refund from 2010,” I referenced the case of U.S. v. Quality Stores, 693 F.3d 605 (6th Cir, 2012), in which an employer fired 3,100 employees, paid them severance benefits and argued that these benefits were not subject to FICA taxation. 

The Sixth Circuit Court of Appeals held that these types of payments were similar to supplemental unemployment compensation benefit payments (also known as “SUB” payments), which are not treated as wages for FICA purposes.  The IRS appealed this decision to the United States Supreme Court.

On March 25, 2014, the Supreme Court unanimously ruled that severance benefits were subject to FICA taxation, as they were related to employee termination against their will and were valued based on job seniority and time served; additionally, the payments were not related to the receipt of state unemployment benefits.  As a result, approximately 2,400 claims for refund will now fail.  In my mind, those refund claims fall under the principle of “nothing ventured, nothing gained.”

We understand this can be confusing and are pleased to discuss this and other issues related to compensation and taxation. 

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