Check with your accountant before accepting severance check.
It may be best to defer check acceptance until 2022.
If you accept in 2021 it will count toward 2021 taxable income which is going to cost you.
It made a significant difference in my case. If you can manage until 2022, it may be best for you tax wise to wait.
Good Luck Guys! - LOVE YOU!
This was posted in @cuk+1dPylzyC. I'm reposting so more people can see it, all credit goes to the OP.
Social Security individual tax limits - 6.2% up to the taxable income levels by year
2021: $142,800
2022: $147,000
Disclaimer: Not a CPA or Attorney
One thing to note is that if you have maxed out on social security in 2021 then your severance won't be taxed the 6.2% in 2021 on any of the payment. You will paid the Medicare 1.4% regardless of year and income (no phase out)
In Florida, with no state income tax, it could be beneficial whereas California's graduated income tax would probably be a ki---r if the severance is substantial.
Project out possible income in 2022 (planning time off or getting back to work at a better employer as soon as possible?) and look at your income projections for 2021 which should be pretty baked at this point. If you have a lot of room in the 24% or below brackets then 2021 might make sense.
Note that Capital Gains/Investment income if applicable and substantial should be factored. There is a 3.8% Investment tax (part of the Obamacare funding tax) above certain income levels depending on single or married cap levels.
"Florida employees only get 14 days which means it’s impossible to wait long enough to get it moved into next year."
Incorrect. I am based in FL and my document clearly states 45 days "to consider this agreement", I also confirmed this with HR.
Florida employees only get 14 days which means it’s impossible to wait long enough to get it moved into next year.
It’s in your best interest to get an employment lawyer.. just getting one month added will payoff on legal. Start with 1.2x number of years of service, if this works out to greater than 1yr settlement don’t expect anything more than the 1yr. Starting the process in mid December will result in a mid-to-late Jan or Feb settlement. Be mindful of the lump sum tax implication and try to max out your retirement savings if you have room to do so. Best of luck all, I went through this a few years ago. It sucked and the bitterness subsides. Simply put, they have a business to run and it wasn’t personal. However, you’ll be much better off at a new company. Reflecting back, you’ll see this was coming years ago. Wrike was an obvious attempt to pivot but that was so misaligned.. I’m surprised the board signed off on such a large outlay… which speaks to the desperation
"Severance pay is taxable in the year that you receive it."
If you sign the agreement on the 45th day, Dec 29, you won't get it until Jan 5 earliest, so it's taxable in 2022. What matters is when you receive the money, not when you were laid off, or when you sign the agreement.
Being short staffed during holiday and year end, I'm fairly confident that finance won't execute a payment until January.
I was laid off in 2019, and while I did negotiate some things, the timing of payments wasn't really negotiable - I did negotiate the (then recently changed) VCIP and received that check separately in 2020, but the timing wasn't really an option - although to be fair, I didn't investigate that specifically. I did make use of the 45 days to meet with my attorney, though, and attorney or not, if they're giving you 45 days to accept the package - use it - even if you just think about it.
No this isn’t an option.
Did they let you do that?