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Well.... when I got my saved 200 sick days back from 33 years but the IRS considers them to be a bonus, and they were with-held at the 25% bonus rate. So I got about $2500 less than I thought I would. Its in the category of what the IRS considers to be supplemental wages and these are always taxed at a flat 25%.
Now how this is handled when you do you income taxes in the spring, God only knows, probably only those akin to God in the IRS do too.
Well.... when I got my saved 200 sick days back from 33 years but the IRS considers them to be a bonus, and they were with-held at the 25% bonus rate. So I got about $2500 less than I thought I would. Its in the category of what the IRS considers to be supplemental wages and these are always taxed at a flat 25%.
Now how this is handled when you do you income taxes in the spring, God only knows, probably only those akin to God in the IRS do too.
Uggh!
My company just offered a voluntary separation package and I am going to take it -- it will move my retirement date 7 months earlier from what I had planned. The severance payment will be a lump sum paid at time of separation in December, and as I understand it will have a 25% withholding. But that doesn't mean that 25% is the taxes owed on it. It will be added to my 2011 income as additional income, and will bump me into a higher bracket than I would be in for 2011. So I will be under-withheld on my regular income. I will have to estimate how much will be owed in April, both fed and state, and make sure I put that much aside.
I wish they would pay it in 2012, but there is some accounting reason they want to take the restructuring charge in this year.
My company just offered a voluntary separation package and I am going to take it -- it will move my retirement date 7 months earlier from what I had planned. The severance payment will be a lump sum paid at time of separation in December, and as I understand it will have a 25% withholding. But that doesn't mean that 25% is the taxes owed on it. It will be added to my 2011 income as additional income, and will bump me into a higher bracket than I would be in for 2011. So I will be under-withheld on my regular income. I will have to estimate how much will be owed in April, both fed and state, and make sure I put that much aside.
I wish they would pay it in 2012, but there is some accounting reason they want to take the restructuring charge in this year.
See if you can work a deal where they take the charge in December, but cut you the check in January. I assume they do accrual accounting, so they get the charge this year, while you on a cash basis, receive a check dated in January that become 2012 income for you. It's no different as your regular pay check that's paid in arrears, that is, your first pay check in January is for work mostly done in December.
See if you can work a deal where they take the charge in December, but cut you the check in January. I assume they do accrual accounting, so they get the charge this year, while you on a cash basis, receive a check dated in January that become 2012 income for you. It's no different as your regular pay check that's paid in arrears, that is, your first pay check in January is for work mostly done in December.
I got a severance check of about one-half year's wages. Called the accounting department before they cut the check and learned they were calculating federal and state taxes in a way very favorable to me. I've always claimed high exemptions because I'm able to write a lot off. My withholding on my severance was primarily SS, very little went to w/h taxes. I eventually did have to come up with a few thousand more for that tax year, but I had done pre-tax planning b/4 the end of that year and paid the installment in Jan. to avoid a penalty.
It was just too big a sum to shelter as much as I would have liked. I asked about them putting 50% in my 401k, but because it was severance and not salary, they couldn't do it, so the entire sum was taxable.
Well.... when I got my saved 200 sick days back from 33 years but the IRS considers them to be a bonus, and they were with-held at the 25% bonus rate. So I got about $2500 less than I thought I would. Its in the category of what the IRS considers to be supplemental wages and these are always taxed at a flat 25%.
Now how this is handled when you do you income taxes in the spring, God only knows, probably only those akin to God in the IRS do too.
Uggh!
As stated you really should have taken retiremnt dec 31 ;so as the check being disbursed i the next ;retire tax year. Even then it will depend on now much you make as to the fianl rate as its just a requirement on withholding.The same thing happened to wife and I when we retired and also one reason to not retire the same year. Some have tax deferrred accounts to tranfer it too also.Its really going to depend on your tax bracket if you will get some of it back after filing in april.
As stated you really should have taken retiremnt dec 31 ;so as the check being disbursed i the next ;retire tax year. Even then it will depend on now much you make as to the fianl rate as its just a requirement on withholding.The same thing happened to wife and i when we retired and also one reason to not retire the same year.
See if you can work a deal where they take the charge in December, but cut you the check in January. I assume they do accrual accounting, so they get the charge this year, while you on a cash basis, receive a check dated in January that become 2012 income for you. It's no different as your regular pay check that's paid in arrears, that is, your first pay check in January is for work mostly done in December.
Well, I asked, but the answer was No. But you can't look a gift horse in the mouth. It's still a net gain to take the package.
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