Just wondering about the tax implications of a lump sum severance payment in 2015- is there any way to delay payment until 2016? If I get laid off mid-Oct, then receive 60 days pay under WARN. Afterwards, I would have to sign a release to receive severance. How long will they give me to consider and sign the release? If 30 days, then I would delay signing until early January, deferring the income to 2016..
7 replies (most recent on top)
I think you have the sequence wrong. If you get your termination letter in October, it will give you the last day you need to come into the office prior to the sixty day period. You have to sign the agreement prior to your sixty day period ending, hence mid-December. You'll have a high income for 2015 and be taxed to death. Sorry.
The sample papers say you have 60 days once you receive the letter to decide. You might be able to get it in 2016
A short period of 1-2 weeks is typical when it comes to signing severance agreement.
Severance Pay, not to be confused with Pension, is paid in one lump sum. It is considered ordinary pay, like salary. It will be taxed like ordinary income. Chevron will withhold 25% in federal taxes plus make appropriate deductions to ESIP, etc. The bottom line is your Federal 1040 will have a much larger figure in it this year.
It is Chevron so it takes them a month to get your severance LETTER. It will be wrong but on the positive side. Once you receive the notification you have 60 days (common with all companies) to review it and turn it in with a signature agreeing to the terms. It will then take a pay period or two to cut you check. It will be 2016.
Delay? At YOUR convenience and benefit? SURELY, you jest! Severance is regular income, so it just jacks you into a higher bracket. Enjoy.
I don't think you can delay. They want you off the books so they can write off the expenses this year. I'm not HR but I wouldn't risk delaying. Chevron and lawyers and Harrington have thought this all out.