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I will be receiving a rather large severance check soon and would like to know if you have any ideas on what I can do so that the IRS doesn't get most of my hard earned money. This severance check is in addition to any salary that I have already earned this year or possibly will earn for the remaining of the year. I am single and own my own home (I only owe about $3000 on the mortgage). HELP!!
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<< I will be receiving a rather large severance check soon and would like to know if you have any ideas on what I can do so that the IRS doesn't get most of my hard earned money. This severance check is in addition to any salary that I have already earned this year or possibly will earn for the remaining of the year. I am single and own my own home (I only owe about $3000 on the mortgage). >>

Well, the top marginal rate is 39.6%, so even with Medicare tossed in and application of the exemption phaseout, if the entire thing is taxed at the top rate IRS won't come close to getting half, let alone most of it.

If you're worried about withholding, talk to your employer about what method they will use to compute the withholding. They have a choice, and the one that does NOT assume that this level of pay is consistent throughout the year results in less withholding. If they do use the lower withholding method, remember to tuck some away--you may owe additional tax come April 2001.

I think your time would be better spent figuring out a) how you want to invest the money and b) how you're going to support yourself in the future.

Phil Marti
Tax Preparer
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