Q. My husband was very careful in 2018 to not make a salary over the limit required to continue his Social Security. The company downsized and he was forced to leave. His severance pay boosted his W2 taxable income to 20,000. We recently received a notice that they will withhold his Social Security because he has been overpaid.
A. Severance pay, vacation pay or any other post-employment payments do not count toward the Social Security annual earnings limitation. The only earnings that count against the limitation are earnings from hours worked.
Your husband needs to obtain a statement from his former employer explaining his reported 2018 earnings. The statement should make it clear how much of the reported earnings were severance pay as opposed to payment for hours worked. Submit the statement to the Social Security Administration and the alleged overpayment will be cancelled.