Are Severance Payments Subject to FICA Tax in 2025?
Old-school assumptions vs 2025 payroll reality Old-school thinking said severance was a clean exit check, handshake, cardboard box, lump sum, and you’re out. No messy payroll stuff. That view still hangs around, and I get why. For years, CFOs and HR folks treated severance like a separate payout bucket. But 2025 payroll reality? Unless you’ve set things up very intentionally, severance is wages for payroll tax purposes, full stop. The default switch is “tax like regular pay,” and payoll systems are more aggressive about that than ever. Here’s the anchor point in black and white: in 2014 the U.S. Supreme…