Taxes on severance pay? U.S. Supreme Court to hear case

By Patrick Temple-West WASHINGTON (Reuters) – The Obama administration on Tuesday will fight before the Supreme Court to keep a defunct retailer from potentially triggering a wave of tax refund claims that could drain $1 billion from major U.S. social programs. In oral arguments before the high court, the Obama administration will ask the justices to overturn an appeals court ruling in favor of issuing a tax refund to Quality Stores Inc, a rural retailer that declared bankruptcy in 2001. Though the tax refund at issue in this case is small – about $1 million – the Obama administration has warned in court filings that the Internal Revenue Service could owe more than $1 billion in thousands of tax refund claims to individuals and businesses if the appeals court ruling is upheld.