For state income tax purposes, Alabama allows an exemption of $25,000 for severance pay. This has been true for a number of years, and the state has issued guidance for employers to indicate the amount of severance pay as an item in Box 14 of the W-2.
Large automakers in Alabama and neighboring states have trimmed their workforce by thousands of workers, beginning in 2006. Some of them, including primarily General Motors and subsidiaries, have refused to call this attrition "severance pay" and worse still, have specifically refused to include any mention in Box 14. It's anyone's guess: legal worries, political correctness, ERISA, etc. etc. but essentially they are not calling this settlement what it really is.
Alabama Dept of Revenue has not been derailed by this outbreak of corporatespeak. They have allowed these settlements as severance pay, and they qualify for the $25,000 exemption. They are allowing amended returns for 2006.
After speaking with them today, they are instructing as follows:
1)Show the entire amount of wages as wages, with no reduction.
2)Show the $25,000 (or whatever amount) as a "negative" on the "other income" line.
3)Since a desired W-2 with the amount indicated is not forthcoming from the employer, enclose a copy of last check stub, proposed settlement paperwork, etc.
I'm sure some Alabama preparers are already aware of this, but I'm sharing this for those of us who don't.
Large automakers in Alabama and neighboring states have trimmed their workforce by thousands of workers, beginning in 2006. Some of them, including primarily General Motors and subsidiaries, have refused to call this attrition "severance pay" and worse still, have specifically refused to include any mention in Box 14. It's anyone's guess: legal worries, political correctness, ERISA, etc. etc. but essentially they are not calling this settlement what it really is.
Alabama Dept of Revenue has not been derailed by this outbreak of corporatespeak. They have allowed these settlements as severance pay, and they qualify for the $25,000 exemption. They are allowing amended returns for 2006.
After speaking with them today, they are instructing as follows:
1)Show the entire amount of wages as wages, with no reduction.
2)Show the $25,000 (or whatever amount) as a "negative" on the "other income" line.
3)Since a desired W-2 with the amount indicated is not forthcoming from the employer, enclose a copy of last check stub, proposed settlement paperwork, etc.
I'm sure some Alabama preparers are already aware of this, but I'm sharing this for those of us who don't.
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