[Individual]Severance pay (Feb-10-2011, 68 days left)

You must include the following in income:

• Severance pay

--Outplacement services: No matter you severance is reduced by outplacement services fee or not, you must include the unreduced amount as your income.

• Any payment for the cancellation of your employment contract

--Accrued leave payment: you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign.

You may make adjustment for gross income :

• Repayment for your Accrued leave payment, because reemployed by another agency. You can reduce this part from your gross income.

You can deduct as miscellaneous deduction (subject to the 2% of AGI limit on schedule A):

• The value of the outplacement services up to the difference between the severance pay included in income and the amount actually received)

PSQ

Source: http://www.irs.gov