Severance payment provides financial support to employees when their positions are terminated due to layoffs or job elimination.
What You Need to Know
- Severance pay can be taxed as compensation on your US tax return
- US severance payments are commonly reported on Form W-2, as wage income
- Severance pay should be reported in the Foreign Unemployment and Government Aid section.
- Misreporting could lead to errors in your US tax return or mismatches with IRS reporting.
How to Report a Severance Payment on MyExpatTaxes
- Go to the Foreign and Other Income section in MyExpatTaxes.
- Select Foreign Unemployment and Government Aid.
- Once the Foreign Unemployment section appears, select the type of Severance pay (Government or Company Funded) you earned and enter the remaining details.
- Save and continue with the rest of your filing.