Severance check, would you add dependants?

[almost there]

Severance check, would you add dependants to avoid overpaying tax's
or leave it alone?

Getting an additional 56 weeks pay, 10 months into the tax year.
The gov will probably end up with about $60k on that check.

Make a change , or leave it & just wait to get the excess back at tax time?

Anyone here been through this?

 

[photoguy]

In 2010, I received severance of about 20 weeks. A huge chunk went to taxes but it made very little difference at the end because I already had another job lined up (with a signing bonuses). So even though I overpaid in taxes, my income for that year was also higher than normal and I only got a small refund at tax time.

 

[JakeBrake]

I've been through that. I just waited to get the excess back as a tax refund. My megacorp had a default percentage that they deducted from severance payments. I went with that.

At the time I was more worried about properly handling my lump sum pension payout and my 401K to IRA rollover. I was also worried about the health insurance conversion from employee to retiree.

Please consider my signature.

 

[almost there]

Thanks Joe.
Your right though.
I have worked out the things you mentioned, and am down to this.
Not a bad place to be.


Added: I think the default percentage is 42%

 

[pb4uski]

Severance check, would you add dependants to avoid overpaying tax's
or leave it alone?

Getting an additional 56 weeks pay, 10 months into the tax year.
The gov will probably end up with about $60k on that check.

Make a change , or leave it & just wait to get the excess back at tax time?

Anyone here been through this?

If the employer offers a 401k I would top it up to the max for the year out of the severance so the taxable portion of the severance would be lower.

Other than that you could sketch out your taxes for 2012 with the severance income and see what additional amount you need taken out beyond your regular withholdings. IIRC on lump sum payments like that they typically withhold 20%, but if you talk with your payroll or HR there may be other options.

 

[almost there]

Bumped the 401k up to 70% last week (only 2 checks left though)
Unfortunately the severance can't be used for additions to a 401k.

 

[pb4uski]

But if your final check will include any unused vacation pay it can be put into the 401k.

 

[almost there]

Your right!
Forgot about that.
That should max out the 401k for the yr. including the 50 yr+ catch up.
(There goes the Vac. fund) LOL LOL

 

[Disappointed]

How do you get 56 weeks? I may be lucky to get 12 weeks when my company gets sold at the end of Aug or Sep. I work for a small, privately owned, total employees of about 250.

 

[almost there]

Mega corp. They have reasons for doing it.
Total lay off in the thousands......
2 weeks pay for every year of service. Max 52 weeks.
(Without the cap it would be 64 weeks total. Plus I loose a yr of un used sick time... gone...) But am just happy to get what I can and get out.