Severance payment correctly stated in the tax return
Did you go into the unfortunate state that your employer had fired you? Then it is only to be hoped that you have received a corresponding severance payment. You must of course also enter this in your tax return.
What you need:
- Form Annex N
How the severance payment is taxed
As the name suggests, the severance payment is paid as compensation for the loss of a job. Nevertheless - although it is not a question of wages - it has to be taxed regularly:
- The severance payment is taxed in the year in which it is paid out.
- This means you could do that Income tax possibly lower the severance payment if you do not have the severance payment paid out until the next year. This fact leads to a tax cut if you earn less money that year.
- The severance payment is not subject to social security, i.e. no social security contributions are levied on it.
- If the severance payment is part of the extraordinary income, the one-fifth rule can be applied. The severance payment is taxed as if it were paid over five years.
- The fifth rule is an advantage if you have a relatively low tax rate that would skyrocket in the severance payment.
Do I have to file a tax return? - Little financial advisor
Apart from the persons who are obliged to file a tax return ...
The severance payment in connection with the tax return
After the severance payment is treated like wages, it must of course also be entered in the tax return:
- To enter the severance payment you need form N of the income tax return.
- In this form, you must enter the declaration of severance payment in line 17 (compensation / wages for several years).
- In any case, submit the notice of termination or notice to the tax return. the severance agreement. Only then can it Tax office check whether the one-fifth rule can be applied to you. Because: Not every employer automatically applies the rule of one fifth.
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