Appreciate any input on the difference in our tax implications for severance payout in 2020 versus 2021.
Why CVX push for severance payout in 2020 instead of 2021?
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R4 will have to be exceptionally fast to get severance in 2020. R3 should have no problem dragging their feet so that they get paid severance in 2021. The company probably does not care other than wishing to complete the process in a timely manner. The Tax code might change in 2021, but it will be a slow process and will not be retroactive. Move on folks.
@2cly+16oYVAs5 The company has already accounted for the severance cost in its books through an accrual process. What that means is that the expenses have been recorded this year, respective when employees receive the severance. Accrual process is Accounting 101, which states that you record the expenses when incurred not necessarily when they are paid.
The company will not get all the layoff costs into 2020 payroll, many will get into 2021 tax year esp R4
If you are notified that you are left standing or that your EOI has been approved, you will enter a period of paid time called redeployment, generally upto 6 weeks, and immediately precedes to termination of employment
After your redeployment ends and your employment is terminated, you will receive an email message via DocuSign that contains your official Release and certain demographic info.
You will have 60 days to consider this demographic data to determine whether you are going to sign the release. To be eligible for 2020 special SESP benefits, original release must be signed by 60-days deadline
Also, if you live in Texas and are already or will soon be past the social security cap, and will be moving to a state that taxes income next year, you could actually be better off paying the higher federal rate this year. But run the numbers yourself.
to the poster who said this
" six weeks of redeployment period get me to 10/26. Two month signing period gets me to 12/25."
Are you sure the 60 days apples from termination? I thought the severance agreement start is at notification of termination NOT after 6 weeks deployment.
If the president changes tax rates change so it could be worse to take the EOI in 2021.
I am in similar situation on tax dilemma.
However, considering the risk of losing EOI completely with a job that I do not like, comparing to 22% tax (2020) vs ~17% tax (2021), I would tick the EOI and play with time...
I am in Round 3 and will take EOI. I am sure I get package in 2021.
I will receive notification on 9/11. six weeks of redeployment period get me to 10/26. Two month signing period gets me to 12/25. Seven day revocation period gets me to January 2. Processing for the next pay period gets me to January 22.
If I return the document a couple of weeks early, I might get paid on January 7
I took severance this month and yes, 2020 will be a large tax bite to IRS for 7 months salary plus Sev. Withholding was done correctly, I will not owe, but they will get~20% effective rate and IRS getting more ever in my history. If 2021, spread out more for smaller % rate. Good news for me is next year should be almost tax free assuming I don't take any retirement yet....
You have 60 days after notification of termination to sign the severance agreement, therefore if you until the last moment to sign it ,add a week for processing thri payroll they cut a check in next payroll batch. It is possible that R4 will get the severance check cut in Jan payroll. If you sign it quickly you will get paid in 2020 tax year?
Company wants '21 to be the recovery and the balance sheets to look good. It's any easy story to lump all costs in '20 and say it was due to pandemic.