Big Tax Win For Terminated Workers and Companies; Big Loss For IRS

We’ll call him Joe.  Joe worked for a retailer that struggled during the Great Recession.  As retail sales plummeted at an annual rate not seen since the Great Depression, Joe’s employer had to lay off its employees and filed for bankruptcy.  When Joe’s employer terminated everyone, it gave each employee a severance package.  The company withheld income tax and FICA (Social Security/Medicare taxes) from the severance payments made to employees and added its own share of FICA taxes.

http://www.forbes.com/sites/toddganos/2012/09/14/big-tax-win-for-terminated-workers-and-companies-big-loss-for-irs/