I read quite a few posts here about people who walked away from their regular job to pursue their dreams of being an entrepreneur. If any of you worked in Kentucky, Michigan, Ohio, and Tennessee (or if you are an employer in these states) you got some joyous news last October when the Sixth Circuit of the U.S Court of Appeals ruled that severance pay should not be subjected to FICA taxes. As a reminder, FICA consists of both Social Security and Medicare taxes. Under the law, employers and employees each have to contribute 7.65% of the employee’s salary (for a total contribution of 15.3%) to cover it. So, if this type of withdrawal from severance pay is illegal, that is almost $1 billion lot of savings for both employers and employees.
As you can imagine 800 taxpayers put in refund claims (totaling $127 million) as soon as the Sixth Circuit decision came down last year. The IRS, about a $1 billion in losses went to the U.S. Supreme Court for a final decision on the matter. So, should you join the line of people making a FICA refund claim? Amanda Haverstick provides the answer.
