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Consider negotiating a higher severance payment to ensure your take-home income matches pre-layoff levels. When tax season comes around, you should be ready to pay the right amount. Use your own words: Your severance agreement might have corporate or financial jargon that you won't understand if you aren't an expert.

There's no way to avoid taxation of your severance pay unless you put it in a tax-advantaged account, just like you can't avoid taxes on your ordinary income unless you do the same. For example, if you take $6,000 of your severance pay and put it into an HSA or IRA, you can deduct that amount from your taxes.

In most cases, it is safe to assume that a party's first offer is not its best offer. Negotiating your severance package is often necessary to ensure you are getting the best package from your employer.

Tips on negotiating While severance packages are often generous, Business Insider magazine suggests that a severance package that has been negotiated is often the most optimal.

Understanding Severance Pay Packages offered by employers usually come in a lump sum and are taxable. They generally include an employee's regular pay along with some or all of the following: Extra pay based on months or years of employment. Compensation for unused, accrued vacation time, sick days, and/or holiday pay.

As noted at the start, it is a good idea to ask for severance pay to be paid out as a lump sum so that you can get the most out of the payment, can have finality, and you won't run into a situation where you end up getting less severance pay than initially promised.

Fired employees do not always receive severance pay from employers, but it does not hurt to ask. Some employers will use a severance package to ensure a smoother transition and avoid claims or lawsuits from the employee.

You can negotiate your severance package (there is often room to improve the first offer) but when you negotiate, you also risk losing the offer on the table or it changing in ways you do not want. For instance, at common law, you have a duty to mitigate, which means you have a duty to look for and take new employment.

To increase your chances of a successful negotiation, choose a reasonable counter-offer. Think about the resources your former employers can offer and what you can offer in return. Employers usually do not want to engage in a lengthy negotiation, so presenting a reasonable offer may encourage them to accept to move on.

Yes, severance pay is taxable. It's treated as regular pay by the IRS. Employees receiving severance should be aware that taxes will be deducted from their severance payment, just like any other paycheck. However, come tax time, you should check to see if you have any deductions that can offset your severance pay.