Sixth Circuit rules for taxpayer in important severance payment employment tax case

Washington National Tax Services

The United States Court of Appeals for the Sixth Circuit on September 7, ruling in favor of the taxpayer in In re: Quality Stores, Inc., affirmed the decision of the district court that severance payments made to former employees are not wages for FICA tax purposes and are exempt from FICA tax.

While this decision directly affects only taxpayers within the jurisdiction of the Sixth Circuit — Kentucky, Ohio, Michigan, and Tennessee — it eventually may be followed by other courts.

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