Severance Payout

[J-Law79]

I was just unfortunately informed that I will be laid off from my job due to a company acquisition. Fortunately, I will receive a severance package that amounts to $13,600.

My salary is at $88K. Are there tax benefits to take into account if I request that my severance is paid out bi-weekly? Or, would a lump sum be taxed in the same manner?

I also need to take into account when I can file for unemployment insurance, so I’m wondering if a lump sum would be best so I can cut ties, and file for UI quicker. I do want to make sure my severance isn’t taxed up the wazoo though.

Thanks for any advice!

 

[cbg]

What is the name of your state?

 

[J-Law79]

California

 

[Chyvan]

Severance is NOT counted in CA for purposes of UI. As to the tax consequences, it's still too early in the year. Had it been December, I'd have told you to wait and let it slip into the next year and hopefully have it taxed at a possibly lower marginal tax rate.

The withholding might be different because of lump sum vs bi weekly, but you can always submit a new W4 to mitigate that.

At $88K/yr, you're in max benefit territory. Just apply for UI on your last day of work.

 

[J-Law79]

Severance is NOT counted in CA for purposes of UI. As to the tax consequences, it's still too early in the year. Had it been December, I'd have told you to wait and let it slip into the next year and hopefully have it taxed at a possibly lower marginal tax rate.

The withholding might be different because of lump sum vs bi weekly, but you can always submit a new W4 to mitigate that.

At $88K/yr, you're in max benefit territory. Just apply for UI on your last day of work.

Thanks see much for the info! I feel as though I’m in delicate territory, so I appreciate it.

 

[LdiJ]

I was just unfortunately informed that I will be laid off from my job due to a company acquisition. Fortunately, I will receive a severance package that amounts to $13,600.

My salary is at $88K. Are there tax benefits to take into account if I request that my severance is paid out bi-weekly? Or, would a lump sum be taxed in the same manner?

I also need to take into account when I can file for unemployment insurance, so I’m wondering if a lump sum would be best so I can cut ties, and file for UI quicker. I do want to make sure my severance isn’t taxed up the wazoo though.

Thanks for any advice!

If you want a lump sum, one way to avoid extra tax withholding is to increase the number of your exemptions for that last payroll. The problem is however, that if you increase the exemptions too high, then come tax time you might end up owing thousands.

If you have a tax professional who does your taxes they should be able to run the numbers for you and tell you what is safe to do.

 

[HRZ]

I'm a fan of money n MY pocket given the same tax issues mid year and the fact that CA does not count it against UI
..you can easily run some estimates as to withholding and pay in at least enough to hit the safe harbor of equal to last years .

EIther way it's not critical....

but you state you " will be laid off" ...nothing is ever in concrete...work diligently and don't gve anyone an excuse to fire you and avoid severance .

Get your network and options for a new position going ...make good use of time and resources .