my projected gross income for 2009 shld be abt 57,000 in california
so this year my company offered me a severance package bcz it is downsizing so if i take this it wld mean i would leave the co before the end of this year and anticipate the payout to be abt 45,000 for the severance pay (im nt counting pension or 401k)
my question is woudl i end up owing taxes at the year bcz if i didnt take it i should get a refund.. irs.gv has an online calculator tool and according to it it says i wll end up paying so but i an trying to figure out when i use the online tool the extra $45,000 how would i enter it bcz when the actually giv me the check i expect them to already deduct taxes .. anyone cn gv me some guidance on how to figure it correctly... im not tryng to avoid paying taxes but i would consider it in making my decision .. to take it all one lump sum or deferred payments or to even take it all thanks
Dear lalavee: You are on the right track. Enter the $45K and also the amount the company will hold out for tax. If possible I believe it would be better to take the buy out next year if that is an option.
Go to www.hrblock.com and try their free calculator it is a bit more user friendly.
There are some year end strategies you could possibly employ, but I don't know your situation well enough to advise.See if you can get a free consultation before the nd of the year.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent
They'd probably take out 25% for federal income tax from the severance.
If you get another job next year, you might not be better off putting off getting the severance until 2010 as the other responder suggested.
Take it as deferred payout. It's still severance pay and will not affect any claim you have on getting unemployment.
There is absolutely no guarantee that you will find work anytime soon. If you take the entire amount in 2009, you will be paying higher and higher tax brackets--for the IRS side, going from $57,000 to $92,000 as single/no kids the entire amount would be taxed at 25%. (This would match the withholding on that one check.)
If you defer the $45,000 to 2010 and *do not* find another job, you start the tax year over again and have access to the 0%, 10%, and 15% tax brackets, putting another $5000 in your pocket...and limit your ability to burn through the money too fast because you won't have it yet.
If you defer the $45,000 to 2010 and do find another job, it works just like if you got the money now, but the tax is deferred to 2010. (If you get another job, assume the $45K is at 25% and put extra money aside.)
Your income is too low for FICA/MC issues to come into play. (My income was higher than yours. I opted for the lump sum, didn't find a job and while I paid less in FICA/MC--meaning my tax bill was more of a wash--I lost a year's earnings history with the social security administration. I will have a $30 month *smaller* social security check when I retire.)