What happens if I do not pay taxes on my severance payment?
December 7, 2022 | 50,00 EUR | answered by Albrecht Schlüter
Dear Mr. Tax Consultant,
My name is Philipp Koch and I have a question regarding severance pay and taxes. I was recently offered a severance payment by my employer due to the company undergoing restructuring and job cuts. The severance amount is substantial and I am unsure of how to handle it from a tax perspective.
I have heard that severance payments are generally taxable, but I am not sure how much the tax burden will be in my case. I am concerned that I may have to give a large portion of the severance payment to the tax office and I am wondering if there are ways to minimize the tax burden.
I have been considering not paying taxes on the severance payment and hope that I will not encounter any issues. However, I am not sure if this is legally allowed and what consequences it could have if I take this risk.
Can you please explain to me what will happen if I do not pay taxes on my severance payment? Are there legal ways to reduce or avoid the tax burden? What would be the consequences if I choose not to pay taxes on the severance payment?
Thank you in advance for your help and support.
Sincerely,
Philipp Koch
Dear Mr. Koch,
Thank you for your question regarding severance pay and taxes. It is understandable that you may feel unsure about how to handle the taxation of your severance pay. I can assure you that it is in your best interest to properly declare and pay taxes on your severance pay to avoid any potential legal issues.
In general, severance pay is taxable and subject to income tax. The tax burden depends on various factors, such as the amount of the severance pay and your individual tax situation. However, there are ways to minimize the tax burden, such as choosing a favorable tax class, deducting work-related expenses, or claiming special deductions. In this regard, individual tax advice can be very helpful in optimizing your tax situation.
If you do not declare and pay taxes on your severance pay and attempt to avoid this, it can have serious consequences. The tax office may demand back payments and penalties, and in the worst case, even initiate a criminal proceeding against you. Therefore, it is strongly advised not to evade taxes on your severance pay.
It is important for you to consult with an experienced tax advisor early on to clarify your tax situation and discuss potential tax optimization strategies. A professional tax advisor can help you manage your severance pay in a tax-efficient manner and minimize financial risks.
I hope that my response is helpful to you and I am at your disposal if you have any further questions.
Kind regards,
Albrecht Schlüter
