Severance Payments to Terminated Employees are Taxable Wages
Employers must treat severance payments to involuntarily terminated employees as taxable wages. In an 8-0 opinion, the Supreme Court held that such payments are "remuneration for employment" for which taxes much be withheld and paid under the Federal Insurance Contributions Act ("FICA").
For more see United States vs. Quality Stores, Inc., 2014 U.S. Lexis 2213 (March 25, 2014).
