In most cases severance is structured as earned income, so
you pay FICA taxes on it can max out a 401K and IRA.

In rare exceptions the SEC allows a severance to be paid
totally into a deferred income account, but you'd probably
have seen special paperwork about that. In the late 1990s
when Chevron was cutting, they had a surplus in their
pension plan which was allowed to be distributed to severed
employees deferred tax plans. Rather rare.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

How would one go about reducing the income tax on a lump sum
serverence package?

max out on 401K?

transfer lump sum to IRA?

any suggestions?

-scrooge

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >