You may not be required to pay Federal Insurance Contributions Act (FICA) tax on any severance pay you receive from your severance agreement. A Judge for the United States District Court, Western District of Michigan ruled that severance payments made to severed employees are not subject to FICA because they are not considered “wages.” See United States v. Quality Stores, Inc., No. 1:09-cv-44 (W.D. Mich. Feb. 23, 2010).
You should consult with your accountant regarding any severance pay you receive from a severance package.
March 20, 2010 -Tom McKinney – Castronovo & McKinney – New Jersey Severance Attorneys