• Quality Stores: The Taxpayer Wins Again on Tax Refund for Severance Pay
  • March 30, 2010 | Authors: Timothy Jessell; Phillip A. Pillar; Tom West
  • Law Firms: Greenberg Traurig, LLP - Washington Office ; Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Philadelphia Office ; Greenberg Traurig, LLP - Washington Office
  • On February 23, 2010, the taxpayer won its FICA tax refund suit for severance again in Quality Stores when its bankruptcy court victory was affirmed. This victory reanimated the issue of whether FICA tax is due on certain kinds of severance payments. It provides further support for existing taxpayer refund claims (which often run into the millions of dollars) and provides a catalyst to protecting claims for 2006. The Quality Stores opinion is of particular interest to all employers who have implemented significant reductions in workforce due to the economy in recent years. The government undoubtedly will appeal the loss. For those unfamiliar with the issue and its history, we summarize both as follows.