In the US the Supreme Court has decided in favor of the IRS in a case involving the tax status of involuntary severance payments made to employees who have been laid off. The Court decided that these payments are subject to the provisions of the federal payroll tax under the Federal Insurance Contributions Act (FICA). Consequently many individuals laid off by companies in recent years will not be able to obtain a tax refund in respect of the severance payments received. This question has been debated for some years but has become important since the financial crisis resulted in a large number of redundancies.
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