Don't leave money on the table in a coronavirus-related layoff. Do consider how severance impacts your taxes and unemployment insurance.
with the process during the pandemic. “I would say yes that you should apply right away, because we are seeing many states taking much longer than usual to calculate eligibility and get people paid,” Wentworth said.Typically, your severance payout is taxable in the year that the money is received, so it may matter if your payout takes place in a lump sum or in incremental payments over multiple tax years.
That’s why Rassas recommends conferring with a tax advisor or other financial planner to evaluate the tax implications of the timing of the severance payments. “Depending upon an individual’s income in the current year and projected for the coming year, it might make sense to negotiate the acceleration of the payment or a delay,” she said.
In some cases, employees may want to request installments rather than a lump sum to avoid paying more taxes and to stretch out the severance money. When a lump sum is a large amount of money, it may put a person “in a higher tax bracket and they may have to pay more in taxes, whereas, if they’re doing it in installments, which is lower, they may not have to owe as much,” said Amber Clayton, the knowledge center director at the Society for Human Resource Management.
Getting your employer’s commitment to help you land a new job is another type of non-payment benefit you can ask for. “The pandemic is placing a financial strain on employers of all sizes, but individuals should attempt to negotiate for some time of outplacement assistance,” Rassas said. “This can include assistance from a career coach, interview coach or résumé writer who should be able to review not only an individual’s résumé, but also their cover letter, selection of references, and other job-search tools.
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