A. Probably not. This has been an ongoing dispute between the IRS and taxpayers. In a landmark case handed down last year (Quality Stores, Inc., DC-MI, 2/23/10), a district court ruled that severance payments aren’t subject to taxes when they are treated as wage-replacement benefits. However, the IRS hasn’t conceded the point, so you might face a challenge.
Tip: Expect this issue to resurface in another court case soon.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- 10 Secrets to an Effective Performance Review
- Small Business Tax Deduction Strategies
- Tweak flexible spending account allocations for next year
- 'Aiding and abetting' discrimination can include giving false reasons for discharge
- Staffing firm CEO accused of skimming $182 million in taxes
- Payroll records and FLSA: Could I be personally liable?