COBRA stipend and severance lump sum

Question

Hi - I was recently laid off from my job. As part of the severance agreement, I received a COBRA stipend of $4000. If I choose not to purchase COBRA insurance, will I be penalized or will it simply be added to my taxable income for 2024?

Also, I received 4 months of severance in one lump sum which put my yearly wages significantly higher than last year. (Was laid off in November so received 2 months additional income with that lump sum to cover me through end of Feb.) Is there anything I can do before the end of the year to avoid paying so much more in taxes?

Thanks in advance!

ChristianC · Answer

The COBRA stipend would generally be reported to you on your W-2 from that employer, and it would be added to your taxable income for the year. There won't be a penalty for not purchasing COBRA coverage.

Generally, your employer should withhold taxes from that income for you to help offset the amount you owe when you file your tax return for 2024, but you can check with them to ask if they did.