Lump Sum Payment Not Tax Exempt.* A downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing program at IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) encouraged workers to voluntarily terminate their employment in exchange for a lump sum payment. The company withheld income and Social Security taxes from the payments. Employees who participated in the program were required to sign releases and covenants not to sue the company. After electing the termination, several hundred former employees claimed the lump sum payments were personal injury awards and sought refunds of the withheld taxes. The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. denied their claims so the employees filed a class action suit contending they had suffered emotional injuries as a result of the termination. A U.S. district court dismissed the suit, finding that the payments were compensation based on the employees' years of service and salary level. The court held that although IBM had anticipated tort claims when it insisted the employees sign the releases, the lump sum payments had nothing to do with any such claims (United States v. Marie N. Abbott, N.D. NY, 12-3-99). --Michael Lynch, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , Esq., professor of tax accounting at Bryant College, Smithfield, Rhode Island Smithfield is a town in Providence County, Rhode Island, United States. It includes the historic villages of Esmond, Georgiaville, Mountaindale, Hanton City and Greenville. The population was 20,613 at the 2000 census. . |
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