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
UPDATE: IRS Releases Revised Form 941 for Employers’ Use in Claiming HIRE Act Tax Exemptions
The Internal Revenue Service ("IRS") recently released a revised Form 941, the Employer’s Quarterly Federal Tax Return, and related instructions to guide eligible employers in claiming the payroll tax exemption offered under the Hiring Incentives to Restore Employment ("HIRE") Act (H.R. 2847). The HIRE Act offers a tax exemption from having to pay the
Tax Treatment of Differential Wage Payments to Employees in Military Service
In recognition of the importance and sacrifices associated with military service, many employers provide a supplemental payment for their employees called to active military service which covers the difference between their military pay and their regular compensation. Pay differentials are provided for varying lengths of time.
Revenue Ruling 2009-11 provides that a differential wage payment
New COBRA Model Notice for ARRA Compliance Published by DOL
The Department of Labor Published Model Cobra Notices implementing the provisions of the American Recovery and Reinvestment Act of 2009.
Individuals eligible for the special COBRA election period described above also must receive a notice informing them of this opportunity. This notice must be provided within 60 days following February 17, 2009. Plan administrators must provide
IRS Releases Information for Employers to Claim COBRA Assistance Credit on Payroll Tax Form
On February 26, 2009, the Internal Revenue Service released detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees.
Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent
IRS issues new Tax Withholding Tables implementing Making Work Pay Credit
On February 21, 2009, the Internal Revenue Service released new withholding tables implementing the new Making Work Pay credit, one of the key tax provisions included in the American Recovery and Reinvestment Act of 2009.
The new withholding tables, along with other instructions related to the new tax law, will be incorporated in
HR GENERALIST RESOURCES: Payroll Tax Withholding from Severance Pay and Other Supplemental Wage Payments
Employers offering severance payment to employees are typically uncertain about the payroll taxes that may apply to these additional payments. Severance pay is treated as “supplemental wages” because it is not a payment for services in the current payroll period but a payment made upon or after termination of employment for an employment relationship that has
Bonus and other Lump Sum Payments to Nonexempt Employees may Impact Overtime Calculations
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