Unemployment

[Kat2204]

I will officially become unemployed on January 6th. I should receive a severance package. How do I report it to IRS to receive a bigger refund ?

[DavidT0202]

Hi @Kat2204 

Severance pay is taxable in the year that you receive it.  Your employer will include this amount on your Form W-2 and will withhold appropriate federal and state taxes.  The good news is you will not have to claim this on your 2022 return, but will instead receive a W2 for 2023 for this amount.  

As far as getting a tax break for becoming unemployed and receiving this package, there is not one.  There are ways to reduce the tax burden. Consider paying some of it into a tax-advantaged retirement or health savings account. 

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