Will my severance pay from my employer be taxed?
- May 4, 2021
- David Greene
- Comments Off on Will my severance pay from my employer be taxed?
Severance pay is generally treated the same as ordinary income, i.e. wages or salary. This is because the IRS treats it as final payment of income due to the employee or sometimes unused vacation day or sick day pay. However, if an employee was fired, and he sues the employer and wins the case, part of that severance pay may not be income. For instance, if the final award can be separated into a portion that is salary and a portion that is paid for another reason, then the part awarded for lthe other reason would not be counted as ordinary income. Examples are if part of the award is for discrimination, sexual harassment or intentional infliction of emotional distress.