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Tax Law (Questions About Taxes)/refund for FICA tax on severance pay

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QUESTION: Am currently receiving severance until Feb 7 due to job layoff.

I have read about a case (United States v Quality Stores) currently circulating in the courts and the IRS about the taxability of severance income.  For now, employers continue to withhold all relevant taxes from severance pay until the case and its appeals are settled (might even go to Supreme Court).  

Employers are advised to file a protective claim for the employer's portion of the FICA tax to avoid missing the statute of limitations (which I believe is 3 years).

My question is, how do I go about filing a claim with the IRS to get a refund of the employee portion that's being withheld from my severance paychecks?  Is there a form?

ANSWER: Trey,

Thanks for your question.

In order to file a protective claim, file a Form 1040X with a changed 1040 attached, along with any other forms that change.  In the explanation, state that you are filing a protective claim in relation to withheld taxes from severance pay. Be as specific as you can.  At the top of the 1040 write "Protective Claim in Regard to taxes withheld on Severance Pay."  Submit the amended return to the address you normally file a 1040.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: What do you mean by "in the explanation"?  Should I attach a cover letter?  And if I haven't filed my 2013 return yet, what should I do?  File 2 2013 returns at the same time? My guess is that if I use Turbotax, I should just file 1 return with that, and then manually file a 1040x.

Answer
If you will look at a 1040X, you will see a box for making an explanation of the changes you are making. File your regular return, then file the amendment at least a month after you file the original.  Otherwise the IRS may get the X form first, and get confused.

The X must be filed manually.

John Stancil, CPA

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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