Legal Question in Tax Law in New York

Re: Got killed in taxes on severence payment!

Sounds like a lot of deductions were taken from the severance, probably due to the lump-sum payment. You should check on what was deducted. There should be no real difference between getting the payments over a year or in a lump-sum, if the total is the same. Only difference is that taxes are paid up front also, rather than ratably. You are correct that if you take a new job, the earnings will be added to the severance and put you in a higher overall bracket. If this is the case, you might find yourself underwithheld and either face estimated tax requirements or money due next year, based upon the rate differental.

Re: Got killed in taxes on severence payment!

It is difficult to give you a complete answer without knowing all of the facts and circumstances.

However, it sounds like a large amount was withheld because it was a lump sum. If you received the payment during 2004 you should move quickly to see whether you are entitled to a refund on your 2004 tax returns.

This year there are several things you could do if you believe that you are facing a similar set of facts. For example, you may increase you exemptions if you reasonably believe that enough tax will be withheld from your income during the year.

If you need my assistance, please feel free to contact me at (212) 971-1384.