Related Practices

Daily Tax Update - March 25, 2014: Supreme Court Reverses Sixth Circuit - Severance Payments are FICA Wages

SUPREME COURT REVERSES SIXTH CIRCUIT – SEVERANCE PAYMENTS ARE FICA WAGES:  The Supreme Court issued an opinion today in United States v. Quality Stores.  The Court reversed the Sixth Circuit and held that certain severance payments for involuntary termination are "wages" subject to FICA tax.  The Court based its holding on the "plain meaning" of the broad statutory definition of wages, and the absence of any applicable exemption.  The Court rejected the taxpayer’s argument that the severance payments are not wages because they are covered by IRC section 3402(o), which provides that certain payments, including the kind of payments at issue, are to be treated "as if" they were wages for income-tax withholding purposes.

The opinion can be accessed via: QualityStores.pdf

IRS RELEASES GUIDANCE ON VIRTUAL CURRENCIES, INCLUDING BITCOIN:  The Internal Revenue Service issued a notice today, describing how existing general tax principles apply to transactions using virtual currency.  The notice provides that virtual currencies, including Bitcoin, that have an equivalent value in real currency, or that act as a substitute for real currency, are treated as property for federal tax purposes, and not as currency that could generate foreign currency gain or loss.  General tax principles applicable to property transactions therefore apply to transactions using virtual currency.  The notice also provides that, when a taxpayer successfully "mines" virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income, and could be subject to self-employment tax if the mining constitutes a trade or business and is not undertaken by the taxpayer as an employee.  The notice further provides that a person who settles payments made in virtual currency on behalf of a substantial number of unrelated merchants could be a "third party settlement organization," required to report its settlement transactions on an IRS Form 1099-K.

Additional information can be accessed via: Notice 2014-21

Revenue Procedure 2014-28 modifies Rev. Proc. 2013-22, 2013-18 I.R.B. 985, which sets forth the procedures of the Internal Revenue Service (Service) for issuing opinion and advisory letters for § 403(b) pre-approved plans (that is, § 403(b) prototype plans and § 403(b) volume submitter plans).