How would one go about reducing the income tax on a lump sum serverence package? max out on 401K?
transfer lump sum to IRA?
any suggestions?
-scrooge
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- posted
17 years ago
Severence Pay
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- posted
17 years ago
In most cases severance is structured as earned income, so you pay FICA taxes on it can max out a 401K and IRA. In rare exceptions the SEC allows a severance to be paid totally into a deferred income account, but you'd probably have seen special paperwork about that. In the late 1990s when Chevron was cutting, they had a surplus in their pension plan which was allowed to be distributed to severed employees deferred tax plans. Rather rare.