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Generally, you must include in gross income everything you receive in payment for personal services.

Per IRS Publication 525 Taxable and Nontaxable Income, on page 4:

Severance pay. You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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