I am in RTP and was laid off two weeks ago. Wondering what the tax implications are of signing the paperwork and taking the package?
Is the 3 months salary, COBRA money and PTO paid to me as a "bonus" or will it look like regular income?
I am trying to figure out how hard the IRS is going to hit me and maybe take the payout differently if I can.
When I got it in 2014, it was all taxed at the higher rate, but, I got a nice return the following tax season.
In NC, severance pay is exempt from state income tax I believe....
It's regular income, and you have no control on the payment structure. It's fixed. The only catch is that it will likely push your income higher for the year than it would have been, since the severance covers multiple months. But it is what it is.....you can't change it.
Yes you will be taxed on that severance money as if it was income. This happened to me last year. I don't know if there's a way to negotiate it coming next calendar year so you can wait to pay taxes on it but I imagine the being paid this calendar year to benefit Cisco somehow.
You have no control over how Cisco will pay you.
IIRC, the separation package detailed how the various payments were taxed. I don't have mine handy to look at, but I think the PTO and "Pay-in-Lieu" was considered income, the COBRA was "grossed up" to cover taxes, and the severance was taxed at the highest rate.
Luckily, you were hit closer to the end of the year and can file your tax return to get your money back 3 months sooner than those LR'd in Aug, but the bad thing is that you're now looking for work during the holidays.
It's regular income, unfortunately.