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I have been a Director for an Insurance corporation. The corporation was sold and I received a severance pay equal to five years of Director fees as a result of the buy-out. Is that severance pay for the Director fees buyout subject to Social Secur

Forum|Forum|7 years ago
June 6, 2019
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Best answer by MichaelL1

Severance Pay is Subject to FICA Tax. ... Like most severance plans, the company's program was based on length of employment and job grade. The employer and the IRS agreed that the severance pay should be treated as income for purposes of income tax withholding.

Typically, fees paid to corporate directors who perform minor or no services for the corporation are reported on a Form 1099-MISC, Miscellaneous Income, and are subject to self-employment tax because such directors are not employees of the corporation, as described in Regs. Sec. 31.3121(d)-1(b)

MichaelL1Answer

Employee

Severance Pay is Subject to FICA Tax. ... Like most severance plans, the company's program was based on length of employment and job grade. The employer and the IRS agreed that the severance pay should be treated as income for purposes of income tax withholding.

Typically, fees paid to corporate directors who perform minor or no services for the corporation are reported on a Form 1099-MISC, Miscellaneous Income, and are subject to self-employment tax because such directors are not employees of the corporation, as described in Regs. Sec. 31.3121(d)-1(b)