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In a related thread, TMFPMarti noted The Supreme Court has agreed to hear a case regarding whether or not severance pay is subject to FICA....

I have an ignorance question. Why would this even be a question? Why wouldn't severance pay just be an additional "regular pay" (here's two weeks' pay, now hit the bricks), with FICA applicable and subject to the usual pay limits of FICA (roughly $114k in 2013 according to Pub 15-A Introductory Material)?

Thanks

Eric Hines
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Why would this even be a question? Why wouldn't severance pay just be an additional "regular pay"...?

Never forget Congress and the courts' motto: Lawyers providing work for lawyers since 1787.

There is disagreement between the 6th Circuit and the Federal Circuit as to whether severance is wages as defined in IRC 3306, which are subject to FICA, or supplemental unemployment, which is not.

Phil
Rule Your Retirement Home Fool
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There is disagreement between the 6th Circuit and the Federal Circuit as to whether severance is wages as defined in IRC 3306, which are subject to FICA, or supplemental unemployment, which is not.

It seems to me that this would also call into question whether severance pay is earned income. That would make a difference if someone received severance early in a tax year, remained unemployed for the rest of the year, and wanted to contribute to an IRA. Probably not a common occurrence, but possible.

Patzer
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