Q:

Is severance pay taxable?

A:

According to Forbes, severance pay is taxable in the year in which the employee receives it. Prior to an employee receiving a severance check, the employer should take out appropriate state and federal taxes. Severance pay is reported on the employee's W-2 form, according to Turbo Tax.

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Severance pay may include monies due to an employee as a result of unused vacation or sick days. This alternate type of payment is also considered taxable by the Internal Revenue Service, according to Turbo Tax. The IRS notes that the only portion of severance pay that is not taxable at the time of payment is pay that has already been taxed but has not been distributed to the employee.

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Related Questions

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    How much can you pay an employee under the table before claiming it on taxes?

    A:

    The Internal Revenue Service notes that for tax year 2014, an employee can be paid up to $1,900 in a calendar year before the employer and employee are responsible for paying taxes on the amount. After the $1,900 threshold is reached both employer and employee are responsible for taxes.

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    When are W2 forms due to employees?

    A:

    As a general rule of the Internal Revenue Service, a W2 form must be provided to an employee no later than Jan. 31 for the preceding year. A former employee is provided a W2 on that date as well, unless that individual requests to receive it earlier. Typically, such a request comes when a person is terminated.

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    Is Carer's Allowance taxable?

    A:

    Carer's Allowance is taxable, according to Carers UK. Based on information provided by the organization, carers will only be obligated to pay tax on the sum if they have additional sources of income that are taxable, such as an occupational pension or earnings.

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    Are stipends taxable income?

    A:

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