On Tuesday, the U.S. Supreme Court ruled unanimously (Justice Kagan recused herself) in United States v. Quality Stores, Inc., Case No. 12-1408 that severance payments made to employees who were involuntarily terminated are taxable wages under the Federal Insurance Contributions Act (FICA). The decision overturns a previous ruling from the Sixth Circuit Court of Appeals in favor of Quality Stores which was seeking a $1 million tax refund from the IRS based on its claim that severance payments were not covered by FICA.
Continue Reading Supreme Court Clarifies that Severance Payments are Taxable

Employers sometimes pay bonuses to nonexempt employees without a thought of potential wage and hour compliance. Ann Bares at Compensation Force notes that Companies may pay a “lump sum” merit increase for employees who are topped out of a salary range. Other examples of lump sum payments include attendance and production bonuses, year-end bonuses and holiday gifts.  Bonuses