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Severance payments may not be subject to FICA
  • Masuda Funai Eifert & Mitchell Ltd
  • USA
  • April 13 2010

Recently, the U.S. District Court for the Western District of Michigan affirmed a Bankruptcy Court’s decision and held that severance payments made to employees due to the employees’ involuntary separation from employment that resulted directly from a reduction in force or the discontinuation of a plant or operation are not wages and are therefore not subject to FICA taxation.