Question: Are terminations of individuals based on job performance or incompatibility covered under SUCBs when the company later refills the job?
Answer: Section 3402(o) defines SUCBs as "amounts which are paid to an employee, pursuant to a plan to which the employer is a party, because of an employee's involuntary separation from employment (whether or not such separation is temporary), resulting directly from a reduction in force, the discontinuance of a plant or operation, or other similar conditions, but only to the extent such benefits are includible in the employee's gross income.
If the amount of SUCBs the company paid over the last three years, calculated at 7.
Search for all terminations over a four-year period beginning in 1999 and determine the amount of SUCBs the company paid after termination and during the three-year statutory period.
Document that severance payments the company made were in fact SUCBs.
Did the company pay SUCBs after the separated employee reached the maximum Social Security wage base for that year?
Did the company pay SUCBs in more than one calendar year?
CPAs need to be careful to fully justify filing the amendment; demonstrating proof of SUCBs is essential.
CPAs SHOULD REVIEW COMPANY PAYROLL RECORDS to determine the amount of potential SUCBs.