What documents do I need to correctly declare my severance pay for tax purposes?
April 6, 2024 | 40,00 EUR | answered by Lorenzo Zimmermann
Dear tax advisor,
My name is Peter Eckstein and I am currently working for a company that will soon be terminating my employment with a severance payment. I am unsure about which documents I need in order to correctly report this severance payment for tax purposes.
My current employment contract states that in case of termination, I will receive a severance payment equivalent to three months' salary. Additionally, it has been verbally confirmed to me that my remaining vacation days and prorated Christmas bonus will be included in the severance payment.
I am concerned that I may not have all the necessary documents to accurately report my severance payment in my tax return. What specific documents do I need to ensure that I do not encounter any tax issues?
I appreciate your assistance and thank you in advance for your help.
Best regards,
Peter Eckstein
Dear Mr. Eckstein,
Thank you for your inquiry regarding the tax treatment of your severance payment. It is important that you carefully gather all relevant documents to avoid any tax issues later on. In your case, where you are receiving a severance payment equivalent to three months' salary, as well as remaining vacation days and a prorated Christmas bonus, there are certain documents that you will need for proper reporting in your tax return.
Firstly, you should keep the severance agreement itself safe and make a copy of it. This agreement should detail all aspects of the severance, such as the amount, the date of payment, and any additional payments like vacation days and Christmas bonus. This agreement serves as proof of the severance amount and the conditions under which it is paid.
Furthermore, you should gather all pay slips showing your regular monthly salary. These will serve as proof for calculating the severance payment equivalent to three months' salary. If your employer has confirmed in writing that remaining vacation days and prorated Christmas bonus will be included in the severance payment, you should also have these relevant documents ready.
Additionally, it is advisable to keep all bank statements documenting the payment of the severance as well as any additional payments. These could be bank statements or transfer receipts. Any correspondence with your employer regarding the severance should also be kept safe.
For accurate reporting of the severance in your tax return, it is important that all these documents are complete. If you are unsure if you have all the relevant documents, I recommend contacting an experienced tax advisor who can assist you in gathering and evaluating the necessary documents.
I hope this information is helpful to you and I am available for any further questions.
Sincerely,
Lorenzo Zimmermann, Tax Advisor
