Taxes, they took almost half of it!!!!!!!

[mikang]

Some of you may remember me saying my DH got mandatory retirement well, they gave him severance pay. It was deposited in the bank last week and over half of it went to taxes! What are they supposed to withhold in taxes? The severance pay was a little over $43,000 and we ended up with $24,000! I just don't get it! I knew they would take out a big hunk, but we didn't plan on that much. We got out all of his slips from work that shows how much they took out for taxes last year and it wasn't that much. Do you think they took out more because of the big amount? DH is going to see if there was a mistake, but I doubt there was. I think it's worth looking into anyway. Has anybody ever had this happen? It just makes me sick that the government gets so much of our money! Oh well, thanks for listening to my gripe!lol!

[freeby4me]

I dont know much about it but i believe that once you reach a certain level of income, your taxes change. That might be why they took out more. You're lucky they took the taxes out for you and you can go back and see if you deserve more. It wouldn't have been good if you had to set aside the taxes and then find out there wasnt enough! Hopefully you can figure it out! :)

[twinkiesmom]

hmmm. That'd be interesting to see what u get back in taxes for next year. Cuz if they already took 24K this year and chances are you won't be in the same tax bracket next year, u should get a good chunk back. But I don't know your situation. Hope it works out for you!

[YankeeMary]

Was that his severance pay or his retirement? Because if it retirement they will tax you out the wazoo...a wise thing to do is to invest the entire amount into certain things that way there is no pentalties...it might be to late for that now...sure hope hubby finds out that it was a mistake...so sorry for you.

[captorquewrench]

you might need to see an accountant.

[Kelsey1224]

Originally posted by mikang
Some of you may remember me saying my DH got mandatory retirement well, they gave him severance pay. It was deposited in the bank last week and over half of it went to taxes! What are they supposed to withhold in taxes? The severance pay was a little over $43,000 and we ended up with $24,000! I just don't get it! I knew they would take out a big hunk, but we didn't plan on that much. We got out all of his slips from work that shows how much they took out for taxes last year and it wasn't that much. Do you think they took out more because of the big amount? DH is going to see if there was a mistake, but I doubt there was. I think it's worth looking into anyway. Has anybody ever had this happen? It just makes me sick that the government gets so much of our money! Oh well, thanks for listening to my gripe!lol!

Absolutely...because it was paid in a lump sum, the total amount of it pushed you up in the top tax bracket. If it had been paid out in weekly or bi-weekly payments, he would have been taxed at his usual rate.

It is all based on a schedule. That one-time payment is treated the same way as a regular paycheck. The fact that it reflected several weeks of pay is irrelevent.

Now...it is possible that at year-end when you file, you will be entitled to much of that money back. For for now...it was withheld based on the IRS pay schedule.

I'm so sorry this happened to you. It really sucks big time!

[cpbaby]

I dont know about this money, but I do knwo that a "bonus" is taxed at something like 43%. They consider it a "Luxury" tax. What good is a bonus if the IRS takes it all?

[AngelGrim]

Wow that is scary that they take that much, I will know not to take a lump sum in anything!

[karefree]

I think I would talk to an accountant. I know if you invest in an IRA (there is a limit ) that money will not be taxed. You could do that for both of you and I think that would get you about $6,ooo credit on you taxes. There may be other options that would take care of some more of it for you. You could possibly save yourselves a lot of money by talking to someone with the knowledge to help you. Good luck. I hope you get some of it back.

[suzski]

mikang, I'm in the military and I know that when people get out with a severance, it is automatically taxed at something like 28% for federal and then whatever your state tax is. Then, when you file your taxes at the end of the year, you usually end up getting alot of it back, as your tax bracket is not that high. The bad news, you don't have much now, but on the flip side, you should see alot of that money next year. I'm sure you were counting on alot more money up front, so it makes it bad, regardless.

[schsa]

They take 42% and then you have to get it back when you do your taxes this year. It's a real crock when they give a lump sum like that. You really get hit hard at one time.

[sivohdarba]

Originally posted by cpbaby
I dont know about this money, but I do knwo that a "bonus" is taxed at something like 43%. They consider it a "Luxury" tax. What good is a bonus if the IRS takes it all?
I was going to say the same thing. My husband gets monthly bonuses and they are taxes at about 50%. The good news is we get most of it back at the end of the year..it then goes into our savings account to help pay the bill for the following year.
Good luck hon, I sure hope that because it was from his mandatory retirement that there are some tax loop-holes your accountant or tax preparer will find to get you more of your money back.

[VALENA-)45]

MY SWEETIE WENT AND DID HIS TAXES AT H&R BLOCK, HE'S NOT GETTING NOTHING BACK AND HE HAD TO PAY H&R BLOCK $72.00 TO FIND THAT OUT. OH, AND HE HAS TO PAY THE FEDERAL $9.00. THE IRS, HAS A 800 NUMBER WHERE YOU CAN CALL AND ASK THEM ABOUT THE MONEY THAT WAS TAKEN OUT.

[Donnagg123]

I know hindsight is 20/20, but what he should have done is given it to you. You are alowed to give your spouse a one time gift of something like 50,000 and they are not allowed to take taxes out on it.

[cinnamonch]

Originally posted by Donnagg123
I know hindsight is 20/20, but what he should have done is given it to you. You are alowed to give your spouse a one time gift of something like 50,000 and they are not allowed to take taxes out on it.

He couldnt give it to her as a gift because it was from a severance package from his job.

What should happen is that when the taxes are filed, they should receive part of the money back because of the overpayment to the IRS.

[mikang]

The 43,000 was his severance pay. He got his 401k but we didn't touch it, he put it in a IRA. I hope we get a lot of it back next year. His job he has now doesn't pay anything near what he was getting so we're going to have to have what's left of his severance to help us make it with house payments and such. It just makes me sick at how much we have to pay uncle sam! I thought the same thing about it being a lump sum that they would take out more. Thanks for all your response! Next year maybe I'll have some to add to our savings!

[Kyla Kym]

(((((mikang)))))) I'm sorry to hear that. That is just horrible.

[Donnagg123]

He couldnt give it to her as a gift because it was from a severance package from his job.

The amount you could give was 11,000 not 50,000 like I thought before. For spouses it is a bit different, but here is the guideline. You could also gift it to your children in a trust fund and I think they cannot touch it as long as the child doesn't touch it for a while too. It would be better than giving it to uncle sam. Also, It does not say anything about it being effected if it is a part of a severance package.

This is from the irs website:

Gift Giving

Tax Tip 2003-46, March 6, 2003

If you gave any one person gifts valued at more than $11,000 in 2002, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift.

The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

You make a gift when you give property, including money, or the use or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:

Tuition or medical expenses that you pay directly to an educational or medical institution for someone's benefit
Gifts to your spouse
Gifts to a political organization for its use
Gifts to charities
If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.

Here are other examples:
Non-taxed Gifts
A gift is the transfer of money, or interest in property, or the use of or income from property, without expecting to receive something of at least equal value in return.

Some examples include selling an item at less than its full value or making an interest-free or reduced interest loan.

For the most part, any gift is taxable to the giver, except:

The first $11,000 you gift to each person during a calendar year
Tuition or medical expenses you pay for someone
Gifts to your spouse
Gifts to a political organization for its use
Gifts to charities
The annual exclusion of $11,000 applies to each individual you gift money or property. You and your spouse may each gift $11,000 to an individual each year.

Examples: You can gift $11,000 to your son and gift $11,000 to your daughter.

You can gift $11,000 to your son and gift $11,000 to your daughter-in-law. Your spouse may also gift $11,000 to your son and gift $11,000 to your daughter-in-law. In this scenario, you and your spouse could gift up to $44,000 to your son and daughter-in-law without paying gift tax.

Other Gift Types
You can pay tuition and medical expenses for someone without paying a gift tax.

Example:
You could pay your niece's tuition of $8,000 and gift her $9,000 in one year without paying gift tax. The $8,000 tuition is excluded because it is for educational expense. The $9,000 is under the $11,000 limit, so it does not require gift tax

[karefree]

Could he have made a contribution to an IRA? That money would not be taxed until it was drawn out and that could be done a little at a time. There may be a limit for contributions though. I don't know. Good luck. I hope you find a way to keep more of the $'s.

[cinnamonch]

Donnagg123


The point I was trying to make was that the taxes are taken out before the check was ever issued.

Giving the wife/child/whomever wouldnt help avoid the amount of taxes taken out. The check is issued from the employer and by law they are to tax it before it is ever issued.

Now he can claim on his taxes that he gave this gift to reduce the amount of taxes due for whatever year its applicable to.

[Donnagg123]

Originally posted by cinnamonch
Donnagg123


The point I was trying to make was that the taxes are taken out before the check was ever issued.

Giving the wife/child/whomever wouldnt help avoid the amount of taxes taken out. The check is issued from the employer and by law they are to tax it before it is ever issued.

Now he can claim on his taxes that he gave this gift to reduce the amount of taxes due for whatever year its applicable to.

Oh, ok. I see :)