Do I have to pay taxes on my severance in a specific timeframe?
July 5, 2024 | 50,00 EUR | answered by Edith Hartmann
Dear tax advisor,
I recently received a severance payment from my former employer and I am unsure if I need to pay taxes on it within a specific timeframe. I have heard that there are tax regulations stating that severance payments must be taxed within a specified period, but I am not sure if this applies to my situation.
Background information: I terminated my employment and received a severance payment which I now need to pay taxes on. However, I am unsure if I need to do this within a certain timeframe or if I can take my time.
My concern is that I may have to make tax repayments if I do not pay taxes on the severance payment in a timely manner. Therefore, I want to ensure that I comply with all tax regulations and avoid any unexpected costs.
Can you please inform me if I need to pay taxes on my severance payment within a specific timeframe and what consequences there are if I do not do so? Are there possible solutions or recommendations you can provide to ensure that I correctly pay taxes on my severance payment?
Thank you in advance for your assistance.
Kind regards,
Ella Stamm
Dear Mrs. Stamm,
Thank you for your question regarding the taxation of your severance payment. It is understandable that you are concerned about whether and within which timeframe you must pay taxes on the severance payment to prevent any tax liabilities.
In general, severance payments are subject to income tax. The taxation is based on the principle of accrual, which means that the severance payment must be taxed in the year in which it was received. There is no fixed timeframe within which you must pay taxes on the severance payment, but it depends on the year in which you received the severance payment.
For example, if you received the severance payment in 2021, it must be declared and taxed in the tax return for the year 2021. If you receive the severance payment in 2022, the taxation will be done in the tax return for the year 2022.
It is important that you correctly declare the severance payment in your tax return, as otherwise there may be tax liabilities. If you are unsure about how to handle the severance payment for tax purposes, I recommend that you seek advice from a tax advisor. A professional tax advisor can help you comply with all tax regulations and avoid any tax liabilities.
In summary, you must tax the severance payment in the year of receipt and it is important to comply with all tax regulations to avoid unexpected costs. If you have any further questions or need assistance, I am happy to help.
Best regards,
Edith Hartmann
Tax Advisor
