Ask Larry

I was part of a downsizing exercise with my company in 2016. I received a lump severance and wish to know if this will count towards my minimal substantial earnings for 2017? Taxes were paid on this amount at a rate of 25%. Thank you for your advice.

Linda

Hi Linda,

Yes, if your severance pay was paid in 2017 and Social Security taxes were withheld from your payment(s), that amount will show up as 2017 earnings on your Social Security earnings history.

On the other hand, if you received Social Security benefits in 2017 and are wondering if the severance pay will count toward the 2017 Social Security earnings test (https://www.ssa.gov/planners/retire/whileworking2.html), then the answer is probably not, assuming that you last worked for your employer in 2016. If that's the case and if the severance pay would put you over the 2017 earnings test exempt amount, you can ask Social Security to exclude the severance pay as a special wage payment (https://www.ssa.gov/pubs/EN-05-10063.pdf).

Best, Jerry