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I will be receiving a severance and retention package of

Customer Question
approx. $30,000 in my last...
I will be receiving a severance and retention package of approx. $30,000 in my last paycheck. How can I avoid the taxes on this lump sum payout ?
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: my company is closing. My last dat is 10/1/2016. A $30,OOO lump sum severance will be added to my last check increasing my yearly income from $73,000 to $103,000. Approx 40% in taxes will be taken out of my last paycheck. Many people with the company are claiming exempt for their last paycheck to avoid the taxes. Is this legit?
JA: Is there anything else important you think the Accountant should know?
Customer: no
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 1 year ago.Category: Tax
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Answered in 9 minutes by:
6/2/2016
Tax Professional: Lev, Tax Advisor replied 1 year ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,130
Experience: Taxes, Immigration, Labor Relations
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You may NOT avoid taxes - the severance and retention pay would be classified as supplemental wages - and as such will be added to your wages reported on W2 form.

Your actual tax liability is determined on your tax return based on TOTAL income, filing status, deductions, etc.

What you likely referred is not tax liability - but withholding.

The purpose of withholding to cover possible tax liability - and withheld amount will be credited toward your tax liability on the tax return.

So if withholding is more - you will be claiming a refund.

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