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applies in the case of severance pay, which is paid by an
employer to an employee as a form of compensation for termination
and, in effect, as a substitute for wages.
We recognize that the right to severance pay accrues, if at
all, upon the occurrence of the one-time event of an individual’s
termination from employment. Consequently, it is arguable
whether severance pay, if paid in a lump sum, raises the same
types of administrative problems as are associated with the types
of recurring payments (e.g., salary, wages, and commissions) that
the Court of Appeals for the Fourth Circuit identified in United
States v. Jefferson-Pilot Life Ins. Co., supra at 1022.
Nonetheless, although an employee’s rights to severance pay come
into being only upon termination, and although some employees may
receive a lump-sum severance payment, see Kroposki v.
Commissioner, supra, in some cases severance is paid over a
period of time, see, e.g., Gross v. Commissioner, supra
(severance payments were made over a period of 18 months in
amounts equal to the taxpayer’s salary before he was
terminated).15 In these cases, taxes are withheld in the same
manner as salary and wages. See, e.g., id. Because severance
pay is paid by an employer to an employee and is often paid as a
15 We point out that bonuses, which typically are paid as
lump sums, are treated as salary or wages for purposes of
continuing levies under sec. 6331(e). Sec. 301.6331-1(b)(1),
Proced. & Admin. Regs.
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