Severance Pay, Retiring Allowances, Tax Deferral, RRSP Transfers. If you need to know more about these subjects, then the following article may be of value to you.
With the downturn of the economy, some who have lost their jobs, may have received large sums in severance and the uncertainty of what to do with it.
Although receiving a large or modest severance package can help soften the blow of losing your employment, the sudden influx of cash can have serious tax consequences if not managed properly. In some cases, it might even be beneficial to negotiate with your employer and arrange to receive severance payments after January 1.
If severance is a one-time payment or a fixed amount payable over a short period with respect to loss of employment, or after retirement in recognition of long service (without continuation of employment benefits), it’s considered a retiring allowance. Retiring allowances are fully taxable in the year received. However, a portion may be eligible for transfer to the recipient’s RRSP, resulting in a deferral of tax on the amount transferred.
Your life and health insurance benefits also need to be addressed rather quickly — often your group insurance can be converted into an individual policy without the need to provide medical evidence, but there might be only a short period of time to do so. Unless you are in excellent health, this could be your only chance to obtain sufficient insurance coverage at a standard rate.
If you would like more details on this subject please see the complete article, at http://www.liwanpo.com/taxes_personal.php