In the tax code there are provisions that clearly state that payment for employment is taxable defining wages as “all remuneration for employment.” However, when a company closes down and tries to be fair to its employees providing severance payments, as in the case of Quality Stores, you are receiving money not for employment. Clearly, wages are taxable for FICA purposes, but the Obama administration is arguing that it does not matter if you actually worked.
The tax code if a different section states that “supplemental unemployment benefits” are exempted from income taxes. It would seem from the plain language that severance payments should be exempt from FICA taxes since they are not for employment but to compensate for your unemployed status.
So once again we have government that loves to show-boat saying how the Republicans are cold-hearted to cut off unemployment benefits, but they are hunting down retarded children unable to file their own tax forms and plan to argue before the Supreme Court that severance payments are taxable. This is always about they get more money out of people regardless what the law or ethics should dictate otherwise. This is called – the house always wins.
