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LawTalk
LawTalk, Attorney
Category: California Employment Law
Satisfied Customers: 27889
Experience:  I have 30 years of experience in the practice of law, including employment law and discrimination law.
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HOW DO YOU TAKE SEVERANCE PAY IN A LUMP SUM WITHOUT GETTING

Customer Question

HOW DO YOU TAKE SEVERANCE PAY IN A LUMP SUM WITHOUT GETTING HIT BY THE
FULL TAX DEDDUCTION
Submitted: 1 year ago.
Category: California Employment Law
Expert:  LawTalk replied 1 year ago.
Good afternoon,

I'm Doug, and I'm very sorry to hear of your situation. My goal is to provide you with excellent service today.

I'm not quite sure what you are speaking of when you refer to a full tax deduction. Can you please explain what you mean by that?

Doug
Customer: replied 1 year ago.

i am not sure , but did you receive my response?

Expert:  LawTalk replied 1 year ago.

Good afternoon Issa,

No, there was no response posted to this question. I'm really sorry, but that happens sometimes with the system. Could you please re-post it here.

Thanks,

Doug

Customer: replied 1 year ago.

they will take a lot of taxes if it is been paid all a once would n it?

Expert:  LawTalk replied 1 year ago.
Hi Issa,

Thanks for the clarification.

There is no doubt that severance pay in CA takes taxes from the payment before they give it over to you-----25% to the feds for taxes and self employment tax which must be paid on the amount, and I believe it is still 6% which is withheld for the state of CA.

However, you are not losing anything---this is not a penalty but simply pre-paid taxes. Self employment tax alone is more than 15%---and that is where the big hit is.

The only possible way for you to avoid all of these taxes is if you can convince the employer to simply pay you your salary for a period of time ans do normal withholding from it. However, that is not usually to the employer's benefit and they may not be willing to do that.

It is possible to lower your ultimate tax rate if you can get your employer to spread the payment over more than 1 tax year. However if it is all paid in 2013 then a $50,000 income is still a $50,000 income and the ultimate tax is based upon that income number. It is only the withholding amounts, and not the ultimate tax paid, that varies with the periodic versus the lump sum payments---which is why I suggested asking for periodic payments from your employer as opposed to the single payment to you.

I wish you the best in 2013.

I understand that you may be disappointed by the Answer you received, as it was not particularly favorable to your situation. Had I been able to provide an Answer which might have given you a successful legal outcome, it would have been my pleasure to do so.

You may reply back to me using the Reply to Expert link if you have additional questions.

Kindly take a moment to rate my service to you based on the understanding of the law I provided. Please understand that I have no control over the how the law impacts your particular situation.

Thank you,

Doug
Customer: replied 1 year ago.

well the 50000 is what they offered over a years time or lumpsum


my concern also is that i want more money for my severance which might include the 50k as initial payment and also get regular salary for the rest of the year on top of that. in that case if they agree will the intial 50k giving right now be considered like a regular ck, since there is more ,


and by the way , while i am get in these cks over a period of time


will i still be considered and employee of that company?

Expert:  LawTalk replied 1 year ago.
Hi Issa,

The fact that you receive the payments over time does not mean that you are still an employee of the company---no.

If you can talk them into a larger severance package and periodic payments then they can deduct standard withholding. However, that is not to their benefit because they will have to pay half of your FICA for you---so while you can ask, they may not be willing to do this for you.

Again though, your actual tax is not going to change. Whether they pay you $100,000
in a lump sum, or over the next 8 months---it will all be earned income for the year and therefore taxable.

If they take more now---it will simply mean that you get a bigger refund next year---but the income tax you pay will be the same.

You may reply back to me again, using the Reply to Expert link, if you have additional questions.

I wish you the best in your future,

Doug
Customer: replied 1 year ago.

while getting paid over the next 8 month if they agree or if i get one lump sum


will i also be able to collect unemployment now.

Expert:  LawTalk replied 1 year ago.

Good afternoon Issa,

That is a completely different question. As for a severance package in CA---keep in mind that if the money you get is not stated in a writing as compensation for you giving up any rights you might have to sue the employer--- if it is simply a lump sum of money, or even payments over a period of time to substitute for your lost wages, then unemployment will consider it wages and you will be ineligible for unemployment benefits until the number of weeks has passed which equals the weekly pay you received before termination divided into the amount of severance pay you receive.

However, as many employers provide in severance agreements, if you have to give up the right to sue the employer for some reason in order to get the severance, then you will be eligible for unemployment benefits immediately.


Please remember to rate my service to you when our communication is completed, so that I will be compensated for my time in providing you with the information you requested.


I wish you the best in 2013,

Doug

Customer: replied 1 year ago.

employer provided me with separation agreement and general release


can i fax it for you to review it and to help me understand all that it means


and then possibly help me negotiate with employer because i am


thinking to go for 200k to 500k


or should i go see an Attorney in person to handle that?

Expert:  LawTalk replied 1 year ago.
Good afternoon Issa,

Even if you paid me more money, I am not allowed to act as your attorney by reviewing your agreement, explaining it all to you, and assisting you in re-drafting it. And it would be equally against JustAnswer rules for me to do anything remotely suggestive of representing you---which is exactly what I would be doing bu negotiating with your employer for you. That would make me your lawyer, which I am not. All I can do is answer general questions of law for you. I'm sorry.

You will need to have a local attorney review the document for you and negotiate on your behalf.

Please keep in mind that until you rate me highly for my service, I will not be credited with helping you.

Thanks again.

Have a great day,

Doug
LawTalk, Attorney
Satisfied Customers: 27889
Experience: I have 30 years of experience in the practice of law, including employment law and discrimination law.
LawTalk and other California Employment Law Specialists are ready to help you
Expert:  LawTalk replied 1 year ago.
Thank you for your positive rating of my service, Issa. It has been my pleasure to assist you and I hope than you will ask for me on JustAnswer should a future need ever arise.

Please feel free to bookmark the following link so you can request me to answer any future legal questions you may have:
http://www.justanswer.com/law/expert-lawtalk/

Thanks again.

Doug

When you receive your Customer Satisfaction Survey from JustAnswer, please do rate me highly (9-10) there as well. It benefits my ability to assist you and other customers, and would be tremendously appreciated.

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