While Congress enacts tax laws and the IRS interprets them, the courts provide additional guidance and clarification on tax rules. Three important recent cases illustrate this point.
FICA Taxes on SUB Pay
Companies downsizing often give severance payments to laid off workers. When the payments are made to workers who are terminated due to a reduction in the work force, job elimination, reorganization, or other similar situation, the payments are called supplemental unemployment benefits (SUB) pay. Employers have been questioning for some time whether these payments should be treated as wages for purposes of FICA taxes.
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