Severance Pay and State Taxes

aimspark

aimspark

PEB Forum Regular Member
Registered Member
So I know that the severance pay is not federally taxed if you receive a VA rating for the same issue. However, where does that leave the state? I am getting my taxes back from the feds, but my accountant is unaware of what happens with the state. I don't want to be taxed if I don't have to.

I realize all states are different (Illinois, where i am originally from) does NOT tax military pay. Alabama (where I am now a resident) does. . . . I would like all of my money. :-)

Does anyone know where I can find some info on this? Thank you!
 
aimspark said:
So I know that the severance pay is not federally taxed if you receive a VA rating for the same issue. However, where does that leave the state? I am getting my taxes back from the feds, but my accountant is unaware of what happens with the state. I don't want to be taxed if I don't have to.

I realize all states are different (Illinois, where i am originally from) does NOT tax military pay. Alabama (where I am now a resident) does. . . . I would like all of my money. :)

Does anyone know where I can find some info on this? Thank you!
Click to expand...

I don't have the answer to your exact question, but here's what I did when I had to sell back 59.5 days of leave (almost 2 months pay!) ....

I went to MYPAY and changed my State AND Federal Tax exemptions from single and 0 to single and 5.

I went and did this on the DFAS MYPAY website as it is THE fastest way to update finance changes that I know of.

The Feds still took out taxes on my sale of leave, but it was far less than at single and 0. And the same went for my State, too. Much lower....

I suppose you could go married and 5. Just don't claim single or married with an EXTREME amount of exemptions (like 10 or something), as DFAS may make you document all of those new exemptions FIRST (names and SSNs) before they will accept them, and then you'd be back to square one again - single an 0. OUCH!

V/R,
nwlivewire
 
Ok, I finished with all the IDES process and got out 16 Dec. 2014. I will be getting a severance as I was 10% on the Army side. I was looking at my final LES to see if they were going to ever pay me as I am starting to get hungry and noticed that my federal exemptions had changed from 0 to 98. Any idea why or how this occurred?
 
Texas Wood Butcher said:
Ok, I finished with all the IDES process and got out 16 Dec. 2014. I will be getting a severance as I was 10% on the Army side. I was looking at my final LES to see if they were going to ever pay me as I am starting to get hungry and noticed that my federal exemptions had changed from 0 to 98. Any idea why or how this occurred?
Click to expand...


Could it be that your severance is tax exempt?

Some severance pay for some folks who get severance is tax free due to combat/combat related injuries. What does it state on your 199 - the form that came back for you to sign from the PEBLO about your medical rating that awarded you the 10%? Look at the "V" codes on your 199.....

Also, if you live in certain states like Washington or Texas (and a few others), those states do not have a state income tax, either.

So in some cases, folks get zero taxed on their severance - depending on what the "V" codes are on their 199.

nwlivewire
 
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