01-463 U.S. v. Fior D'Italia

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The FICA statute’s language, taken as a whole, does not prevent using an aggregate estimation method. Fior D’Italia claims that, because sec. 3121(q) speaks in the singular – “tips received by an employee in the course of his employment” – an employer’s liability attaches to each individual payment, not when the payments are later summed and reported. However, sec. 3121(q) is a definitional section. Sections 3111(a) and (b), which impose the tax, speak in the plural – “wages” paid to “individuals” by the employer “with respect to employment” – and thus impose liability for the totality of the “wages” paid, which totality, says the definitional section, includes each individual employee’s tips.

There is no reason to read sec. 446(b) – which authorizes the IRS to use estimation methods for determining income tax liability – or sec. 6205(a)(1) – which authorizes the Secretary to adopt regulations prescribing mechanisms for employers to adjust FICA tax liability – as limiting the IRS&Aelig; authority to use an aggregate estimation method to compute in computing FICA tax liability.

242 F.3d 844, reversed.

Local effect:

The decision affirms current Seventh Circuit law, 330 West Hubbard Restaurant Corp. v. U.S., 203 F.3d 990 (7th Cir. 2000).

Breyer, J.; Souter, J., dissenting.