Are severance packages taxed?

Answer by  zippythepinhead (46)

Yes, any pay you receive as part of a severance package is fully taxable, just like any other compensation including bonuses and salaries. This includes lump sum amounts as well as pay for accrued vacation or unused sick days. If you leave your job and are eligible to collect unemployment benefits, they will also be taxed.

Answer by  Latin4 (11170)

Yes, you can either be taxed when you get or at tax time. Either way everything you get is taxed.

Answer by  Kurt (4579)

Yes, severance pay is taxable income. It is considered payroll compensation and is fully taxable. The problem sometimes comes up where you get a large severance package and the payroll department does not adjust for the time period ( example - weekly ) and too much tax is withheld. But severance is taxable.

Answer by  rose56 (36)

Yes, a severance package is taxed as it is considered earned income. Withholdings are Federal, State and FICA taxes at your applicable rate.

Answer by  MarkWatrous (729)

Yes, any severance pay that you receive from your employer is taxable in the year that you receive it. Your employer will include this amount on your W-2 and will withhold appropriate taxes.For Federal taxes. You must report this income on Form 1040 Line 7. see irs pub 525.

Answer by  LeheckaG (1826)

Yes, Severance pay ( excluding death, disability, retirement, or other involuntary severance ) is generally treated as taxable income or wages for federal & state income/withholding & FICA/Medicare/Social-Security taxes. There are various other "bona fide" or "qualified" deferred compensation plans recognized by the IRS, for which compensation might not be treated as "severance pay".

Answer by  John (9008)

Severance packages are income. As such, they are subject to the same taxes that would be applied to a regular paycheck.