Is there an IRS penalty on Vacation and PTO hours that are cashed out at separation from a job?
I have recently been terminated from my job and I have over 100 vacation hours and 25 PTO hours saved up. I know my employer will cash them out to me, but, I was wondering if there is an IRS or tax penalty on those hours? Or will the hours be paid out at my full former pay rate (with normal taxes)?
Originally posted 2010-01-22 08:06:53. Republished by Blog Post Promoter
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Comments (5)
No penalty.
Taxable income though.
If your employer tags it as an irregular payment, you’ll get paid at your current rate and then the tax is withheld at 25%.
If that’s too much, you get the excess back when you file.
Feel lucky, not every firm actually pays vacation time.
No penalty – but it is taxable income.
You will owe tax at normal rates.
It will be treated as ordinary income and taxed as such.