Author Topic: Am I Doing this Correctly? Tax Sheltering Severance Payment?  (Read 631 times)

surfhb

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Am I Doing this Correctly? Tax Sheltering Severance Payment?
« on: March 25, 2017, 10:29:14 AM »
I was laid off in Feb with a $16k severance and opted not to take out Federal taxes.

My plans were to find a new job with a 401k and pump that 16k in as fast as possible and pay my bills with the severance.

Well, my wish came true but I somehow think I'm not really sheltering any taxes with my plan?    Can anyone help?

Btw.  My gross is around $60k


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SeattleCPA

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Re: Am I Doing this Correctly? Tax Sheltering Severance Payment?
« Reply #1 on: March 25, 2017, 03:40:43 PM »
No, that should work.

I.e., your W-2 box 1 income will be $16K for job #1... and then roughly $44K for job #2.

I.e., for job #2, box 1 will be he $60K minus the $16K for your 401(k) elective deferral.