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One to Keep an Eye On: United States v. Quality Stores, Inc., United States Supreme Court



As with many employment and labor law related cases that are being litigated around the country, there are always a few that stand out.  This is one to keep an eye on. 


Facts:  In 2001, Quality Stores filed for bankruptcy.  Before and after the bankruptcy proceedings, Quality Stores terminated thousands of its employees.  Those employees that were terminated received severance payments under two different plans.  For federal income tax purposes, Quality Stores reported the severance payments as wages on W-2 forms and withheld federal income tax.  Quality Stores also treated the severance payments as taxable under FICA and withheld and remitted to the IRS both the FICA tax they owed as employers and the FICA tax their employees owed. 

The Main Issue:  Whether severance payments made to employees whose employment was involuntarily terminated are taxable under the Federal Insurance Contributions Act, 26 U.S.C. 310 et seq. 

Lower Court Opinion:  http://www.ca6.uscourts.gov/opinions.pdf/12a0313p-06.pdf 

Current Status:  On January 14, 2014, the United States Supreme Court heard oral arguments on the case.


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