tax help please!!!!!!!!!!!!

[texxan1]

Ok so here is the deal, ive been waiting to fire for a little while and FINALLY, i get notice from my company that i will be eligible for voluntary severence ( 18 months pay) in september.. I am in themiddle of a huge project in egypt and i know there will be expectations that i stay as long as i can to help the project get to completeion.. I cant get a strait answer on my taxes.... I will get a fully paid 18months of cobra,but after that i am on my own as no healthy bennies since i am leaving the company early... SO i will have to look at ACA or VA if i am eligible etc... My thoughts are, that if i get my payout this year, and cobra covers me all of 2021 and some of 2022 that i can show i have less than a 50k AGI for a family of 2, i should get the maxiumum subsidides for ACA... If i get my severence after jan 1, its gonna be me showing ALOT of income even though i didnt work.. So then i wont have an AGI low enough to get good ACA subsidies.....

So what do you guys think is best.. take the hit on this years taxes, or stay into next year....

No reason to stay for bonus's as they have cancelled them for the year,
no reason to stay for extra pension, as it would be like 5k for staying into next year

Just need some help arranging my thoughts....

Knowing i will be getting married in the early part of next year, makes me look hard towards insurance because my bride to be i met overseas and she will be new to the states.

Thanks

Tex

Ps ITS ALMOST TIME TO GO FISHING LOL

[MustacheAndaHalf]

I don't think I understand the choices clearly.  If you're about to quit a job, and will get 18 months severance, then you should wait and take the severance payout.  Do you have a choice of getting 18 months of severance in Sept or 2021?

Personally, when you're quitting, you shouldn't view the company as trustworthy.  I wouldn't trust the company to pay you 18 month severance if you stay until the end of the project - I'd take it at the same time everyone else gets laid off.

[terran]

It sounds like you'll have COBRA for all of 2021 regardless of how things play out? In that case, income only matters for 2022 and beyond.

[texxan1]

Sorry if i wasnt clear enough.

My boss has said that i will have the choice to get the severence before jan 1, or after jan 1.    if i get it after jan one, i will show alot of income for 2021.... if i take it before, i will just show my side hussles which will help me qualify for ACA subsidies in 2022.

My concern is basically how that income will make me ineligible for ACA subsidies for 2022.....

if that made sense lol....

I kinda had a plan to take that severence pay and put it in a seperate bucket in Vanguard index funds just for medical only and use what it makes to annually to pay for our medical premiums etc

[seattlecyclone]

Income in 2021 doesn't make you ineligible for ACA subsidies in 2022. ACA subsidies are always based on current-year income. You may need to put in a little extra effort to explain why your 2022 income will be lower than your 2021 income in order to get your local exchange to believe your change in income and give you an advance on these subsidies, but your circumstances seem normal enough that this shouldn't be too much of an issue.

[texxan1]

thanks,

That helps alot... im still trying to figure this all out and prepare myself.

Cheers

[terran]

If you have the choice I would probably push the extra income to 2021 since you won't then be stacking it on top of this year's income and as seattlecyclone says it won't change your 2022 ACA subsidy.

[reeshau]

@texxan1 ,
I'm in this same boat, but this year.  I did purposely delay my severance into the "next" year, to spread out the taxes--although it was Irish taxes I was more worried about, because they were higher.  My healthcare ran out yesterday, so I have 6 months of full cost ACA, but will move to subsidized for 2021.

You say you have cobra for 2021, but I would tell you to look at the ACA plans; cobra means you pay the whole cost, (employer portion + employee portion you see today) and that may not actually be cheaper than a public plan.  Plus, you get started sooner working out the coverage / doctors you want to have, assuming ACA survives. :)  Or, did you mean you get paid healthcare for a time as part of your severance?

With a bronze, full-cost ACA plan in Texas available at $1,000-$1,300 per month, [severance taxed at highest bracket] >> [lost ACA subsidy] for year 1.  And it's not just the "end state" taxes, but withholding on a lump sum like that will either be a (high) standard percentage, or assumed as if that is your regular pay by the payroll processor.  So, a lot of money is tied up for a year.

[texxan1]

I should have been more clear, I am going to have Paid Cobra (fully) by my company for the 18 months.... so that will give me time and lessen the initial ouch factor..  Im just trying to tydi it all up.... but they seem to be giving me the option of leaving before the end of the year or after the first... i need to talk to HR and ask about what the final day would be and if i would recieve me check that day or what.. makes a big difference to me.... working it out, Fire SOOOOON

@texxan1 ,
I'm in this same boat, but this year.  I did purposely delay my severance into the "next" year, to spread out the taxes--although it was Irish taxes I was more worried about, because they were higher.  My healthcare ran out yesterday, so I have 6 months of full cost ACA, but will move to subsidized for 2021.

You say you have cobra for 2021, but I would tell you to look at the ACA plans; cobra means you pay the whole cost, (employer portion + employee portion you see today) and that may not actually be cheaper than a public plan.  Plus, you get started sooner working out the coverage / doctors you want to have, assuming ACA survives. :)  Or, did you mean you get paid healthcare for a time as part of your severance?

With a bronze, full-cost ACA plan in Texas available at $1,000-$1,300 per month, [severance taxed at highest bracket] >> [lost ACA subsidy] for year 1.  And it's not just the "end state" taxes, but withholding on a lump sum like that will either be a (high) standard percentage, or assumed as if that is your regular pay by the payroll processor.  So, a lot of money is tied up for a year.