sick time pay out

Have client (police officer) who has sick time pay coming.

Can she deposit the Sick-time payout in her AXA Non-qualified annuity through work and avoid taxes?

or…

Whether she deposits the money into her AXA or somewhere else, the amount will be taxed to bottom line income?

Is there anyway to avoid being taxed on sick pay out?

Thank you,
Douglas



Sick pay is taxable unless the client paid for the policy paying the sick pay. If the sick pay is an employer benefit, the payments are taxable.



You mentioned to me that sick pay was taxable unless the person paid for the sick pay policy.Her HR person is stating the following:- I believe the sick pay, although taxable, can be put (up to a certain dollar amount) directly to your AXA NQ account (457 plan) or IRA by the township and taxes will be due upon withdrawal from that account.Is the above correct (since she doesn’t take possesion of the money) and if so how much can the township deposit without any taxes?orIs she taxed no matter how the sick pay is paid out or transferred or deposited (she didn’t pay for the policy)?Thank you,Douglas



You mentioned to me that sick pay was taxable unless the person paid for the sick pay policy.Her HR person is stating the following:-I believe the sick pay, although taxable, can be put (up to a certain dollar amount) directly to your AXA NQ account (457 plan) or IRA by the township and taxes will be due upon withdrawal from that account.Is the above correct (since she doesn’t take possesion of the money) and if so how much can the township deposit without any taxes?orIs she taxed no matter how the sick pay is paid out or transferred or deposited (she didn’t pay for the policy)?Thank you,Douglas



The sick pay would ordinarily show as taxable income on her W-2, but similar to a 401k contribution if these amounts are then added to her elective deferrals to the 457, the taxable income will be offset and not show in Box 1 of the W-2. However, if these amounts are instead contributed to her IRA, they would not be deductible if her modified AGI for her filing status is too high for the IRA deduction. Taxes are only avoided if these contributions are both deductible and are amounts that she otherwise would NOT have contributed to these accounts.



So if she is already contributing the max to her Roth IRA can she still have the sick pay transferred to her 457 plan?  She makes approx. 110k and has sick time of 65k.Can she still contribute to her 457 plan $27,500 (110k x 25%) for the next 3 years with the 68k of sick pay?thank you



So if she is already contributing the max to her Roth IRA, can she still have the sick pay transferred to her 457 plan?  She makes approx. 110k and has sick time of 65k.  Can she still contribute to her 457 plan $27,500 (110k x 25%) for the next 3 years with the 68k of sick pay and not get taxed?thank you



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