When One gets laid off or fired, they receive their PTO… Is this PTO taxed just like regular income or do they apply a special kind of tax, such as like they do with bonuses… Or, better yet, do they apply no tax?
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They paid my pto out on my last paycheck as an employee (pre severance pay) and took 401k percent out for that too.
Did you really say “no tax”???? OMG that’s funny 😄
If you use future PTO before accumulated and then get laid off, you do not have to pay it back. Just a little tip
@fx OK I’m confused when you mentioned the 401(k) contributions; are you saying they deduct from your severance taxes on every contribution made..if that’s the case you would be left with a 401(k) account that holds nothing or a tiny fraction of where you were before you got laid off. I know I must sound up too, but I am new to this layoff/firing game and 401(k) contributions. So I hope you can give me a little bit more detail. Thank you.
They’ll deduct 401k contribution as well so keep that in mind to adjust if needed.
Its taxed as supplemental income which is the same as how your annual bonus is taxed. In California, thats 40%. You'll get the rest back when you file taxes depending on your tax situation.
My experience was PTO pay out was taxed as "supplemental income" which was a higher rate than regular salary. Worked out to be approximately 30+% which is similar to bonus.
It is taxed as ordinary income.