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Tag: job loss

  • Can you save tax by putting severance into a corporation? – MoneySense

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    How is a lump-sum severance taxed?

    When you lose your job and receive severance, it may be paid as a lump sum payment. It is generally a certain number of weeks of salary that increases based on factors like length of service, age, and seniority. Other factors can play a role, though. 

    When you receive a lump sum payment, the withholding tax is generally only 30%. The problem is that regardless of the withholding tax on a lump sum severance payment or any other source of income, when you file your tax return, the appropriate tax rate is determined. 

    If you receive a large severance, or have a high income to begin with, the tax owing on the payment could be an additional 20% or more.

    Related reading: How to avoid tax on severance pay

    How is salary continuance taxed?

    When you lose your job, you may continue to be paid your regular salary for a certain period of time. This is called salary continuance. 

    The payroll withholding tax is the same as if you continued to be paid a salary. The result is that your tax withholding should be more or less in line with what your tax owing will be on your tax return, barring other income sources, tax deductions, or tax credits. 

    How does a corporation save tax?

    Corporations can help defer and save tax, Geoffrey, but it depends on the circumstances. The best tax use case for a corporation is to earn active business income. If you run a business and earn profit through a corporation that you leave in the corporation and do not withdraw, it can be subject to a low rate of tax. 

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    Depending on the province or territory, it can be as low as 9 to 12%. There is more tax payable when you withdraw the money and use it personally, but a corporation is definitely a great tax deferral tool.

    Income Tax Guide for Canadians

    Deadlines, tax tips and more

    The problem with the severance is that it is employment income. If you have it paid into a corporation or you transfer the payment into a corporation, that does not magically turn T4 employment income into corporate active business income. As a result, a corporation will not help you save tax on a severance. 

    Does putting money into a corporation to invest save tax? 

    The tax rate on investment income earned in a corporation is similar to the top tax rate in most provinces and territories. As a result, earning investment income in a corporation tends to result in comparable or even more tax than earning it personally, Geoffrey.

    So, why do people use investment holding companies? The reason is the aforementioned small business tax rate of 9 to 12%. If you earn business income and can leave it in a corporation to invest, you may be able to invest roughly 90 cents on the dollar of your corporate profit. 

    Business owners often do so using a separate investment holding company, where they can transfer money out of their active business. However, putting personal savings into a corporation to invest will not generally save you tax. 

    How can you save tax on a severance?

    If you want to save tax on a severance, there are two easy ways, Geoffrey.

    The first is to contribute to your registered retirement savings plan (RRSP). You may even have the opportunity to have your employer transfer some or all of your severance directly into your RRSP with no withholding tax. But remember, this is like getting your tax refund up front. You will not also get a tax refund when you file your tax return. 

    The second opportunity is to defer the severance to a future year. Especially if it is later in the calendar year, your employer may be open to deferring the payment to January to push the incremental tax back one year. Some employers will pay a severance over multiple years, but this is less common. 

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    Jason Heath, CFP

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  • What to do when you get laid off – MoneySense

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    Statutory vs. common-law severance

    In every province and territory, there are statutory minimum payments that you are entitled to receive as an employee whose employment is terminated. This is called termination pay. This generally applies after three months of continuous employment and is meant to provide a safety net after you are let go without cause. Termination pay is generally a certain number of weeks of salary per year of service up to a maximum. 

    Beyond this minimum payment, employers may also offer severance pay. This compensation is beyond the statutory minimum and based on common-law entitlements—basically, what you might get if you went to court. Both employees and employers prefer non-litigious solutions to a termination, and so may agree on a payment that is somewhere in between the statutory minimum termination pay and the common-law severance amount. 

    Severance pay is not a specific formula, because the potential entitlement can be based on things like someone’s length of service, the type of position they hold, their age, and other factors.

    When an employer offers a severance package, the employee is not obligated to take it. They can seek advice from an employment lawyer to understand the offer and whether they should be asking for any variations.

    Should you take a lump sum or salary continuance?

    Some employers offer a lump-sum severance payment that is payable all at once, while others offer salary continuance where payroll deposits continue for the duration of the severance. 

    If you have the option to receive a lump sum, you may be eligible to defer some or all of it to a subsequent calendar year. This may be advantageous, especially if it is late in the year, to avoid having a large payment taxed at a high tax rate. Due to Canada’s progressive tax system, you may pay less tax to have the payment deferred and taxed in a subsequent year than added to your current year’s income.

    If you have registered retirement savings plan (RRSP) room, you might choose to direct some or all of the payment to your RRSP. In this case, it will be deposited pre-tax, so that the gross amount goes directly into your RRSP. That means you will not get a large tax refund when you file your tax return, as you would were you employed the whole time. It is as if you received the tax refund up-front since no tax was withheld from the income deposited to the RRSP in the first place.

    Compare the best RRSP rates in Canada

    New EI rules can help

    When an employee is terminated, they are generally eligible to collect Employment Insurance (EI) benefits. The federal government introduced a temporary change to EI for new claims in March 2025 in response to the U.S. government’s tariffs on several foreign countries, including Canada. The temporary measure was meant to end on October 11, 2025, but has been extended to April 11, 2026. 

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    There is typically a one-week waiting period after salary continuance ends. For lump-sum separation earnings like severance pay, vacation pay, or sick-leave credits, there is normally a further delay to apply. But under the temporary EI measures, a terminated employee can apply for EI benefits immediately.

    Regular EI benefits are generally capped at 45 weeks, but under the temporary measures, a recipient may be entitled to an additional 20 weeks if they are a long-tenured worker. To be considered a long-tenured worker, the applicants must have met two conditions:

    • Received fewer than 36 weeks of regular or fishing benefits in the three years before the start of a claim
    • Paid at least 30% of the annual maximum EI premiums for at least seven of the 10 years before the year that a claim starts (the EI maximum for 2025 is $695 per week)

    Are you still entitled to benefits?

    If you had benefits like life, disability, or medical insurance, a termination will generally end this coverage. Life insurance is often extended based on the number of weeks of salary you are paid out. Disability insurance generally ends on your last day of work. 

    Some group life insurance policies allow you to convert your coverage to a personal policy. This may be advisable if your health is poor, as you may be able to maintain it without having to provide health information to the insurer. 

    You can purchase your own life insurance policy from an insurer, and this may be preferable if your health is good. Disability insurance is more complicated to replace, because if you are not working, you do not have an income to replace. 

    Although the loss of medical coverage may be worrisome, it may not be necessary to replace it. Health insurance is not meant to create a windfall where you receive more back from the insurance company than you pay in premiums. To the contrary, the insurer makes a profit when the average policyholder pays more in premiums than they receive back in reimbursements. As a result, rushing to replace coverage may not be advantageous compared to just paying for health-care costs out of pocket when your coverage ends. 

    Dealing with pensions and group RRSPs

    If you have a defined benefit (DB) pension, you may have the option to take a lump-sum payout, some or all of which may be eligible to transfer on a tax-deferred basis to a locked-in retirement account (LIRA). When you forgo your future monthly pension, you need to invest the proceeds to produce a retirement income. Not all pensions allow you to take a commuted value transfer, however, and some limit the option based on your age (e.g., only under age 55). 

    When interest rates are lower, the lump sums paid out are higher; when interest rates are higher, the payouts are lower. Those best suited to consider a lump sum are investors with a high risk tolerance or a short life expectancy. 

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    Jason Heath, CFP

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  • Trump Says There Could be Firings and Project Cuts if Shutdown Continues

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    U.S. President Donald Trump on Thursday said federal workers could be fired and projects cut if a government shutdown continues, even as he suggested Americans might get rebate checks from new tariff revenues.

    “There could be firings, and that’s their fault,” Trump said of Democrats in Congress, when asked in an interview with OAN television network about a recent memo from the Office of Management and Budget that raised prospects of firings.

    “We could cut projects that they wanted, favorite projects, and they’d be permanently cut,” he said, adding, “I am allowed to cut things that should have never been approved in the first place and I will probably do that.”

    The federal government partially shut down on Wednesday after Congress failed to reach a funding deal, with only essential services continuing.

    Trump said revenues from new tariffs were just starting to kick in but could eventually reach $1 trillion a year. He said some of the funds would help pay down the government’s debt, which he said could reach $38 trillion.

    Trump’s tariff estimate far exceeds that of Treasury Secretary Scott Bessent, who last month said customs duty revenues from Trump’s tariffs could top $500 billion a year.

    U.S. Treasury data shows the federal government has $37.64 trillion in federal debt.

    The Republican president said his administration was looking at using tariff revenues to issue rebate checks for Americans.

    “We also might make a distribution to the people, almost like a dividend to the people of America,” Trump told OAN. “We’ve thinking maybe $1,000 to $2,000. It’d be great.”

    Reporting by Kanishka Singh and Andrea Shalal, Editing by Franklin Paul and Cynthia Osterman

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    Reuters

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  • Long Island construction jobs fall for 6th straight month | Long Island Business News

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    THE BLUEPRINT:

    • Long Island lost 4,900 from August 2024 to 2025

    • Sixth consecutive month of decline

    • , labor shortages, and zoning issues cited as main factors

    • Nationally, job growth slows with only 177 of 360 metros seeing gains

     

    Construction employment on Long Island saw another year-over-year drop in August, the sixth straight month of decline, according to a new report from the Associated General Contractors of America, blaming the shrinking number of jobs nationally on tariffs and workforce shortages. 

    Nassau and Suffolk counties lost 4,900 construction jobs from August 2024 to August 2025, a 6 percent year-over-year decline, falling from 84,600 to 79,700, the AGCA reports.  

    Regionally, the number of construction jobs in New York City was down 5 percent, losing 7,900 jobs from August 2024 to August 2025, falling from 145,500 to 137,600. New York City’s was the largest of the 360 metro areas in the report.  

    Nationally, construction employment rose in 177 of 360 metro areas between August 2024 and August 2025, while it declined in 125 metro areas and was unchanged in 58 areas, according to AGCA and new government employment data. It’s the fewest number of metro areas adding jobs since 2021. 

    Association officials noted that many private-sector developers appear to be putting projects on hold amid rising prices caused by tariffs, workforce shortages and higher . 

    “Construction employment has stalled or retreated in more and more areas as owners pull back on projects in the face of higher costs,” Ken Simonson, the AGCA’s chief economist, said in a written statement. “Workforce shortages, tariffs and higher interest rates are inflating construction costs and schedules to the point where many projects no longer appear to make sense to developers.” 

    Here on Long Island, industry experts say the biggest obstacle is the lack of multifamily zoning that limits opportunities to build housing, the type of construction that’s in the greatest demand. 

    “We face the same challenges, same material costs, same labor costs, all that stuff that everyone else across the nation faces,” Mike Florio, CEO of the Long Island Builders Institute, told LIBN. There is greater opportunity when you go to the Carolinas and Austin, Texas and Florida and the Southeast, when here there’s not as much opportunity to build. The lack of approvals and permitted jobs is holding Long Island’s economy back.” 

    Nationally, there were 188,000 job openings in construction, seasonally adjusted, at the end of August, according to a government report, that’s a 38 percent decline from a year earlier and the lowest total since 2017. The data suggests even fewer areas are likely to have construction employment increases in the near future, Simonson said. A prolonged federal shutdown could also impact construction employment if public works projects are suspended or fail to get needed approvals to start because federal officials are unavailable to sign off, according to the statement. 

    Metro areas adding the most construction jobs over the last year include the Arlington-Alexandria-Reston, Va. Area, which added 8,200 jobs for a 9 percent increase; followed by the Washington D.C area, which added 6,600 jobs for a 14 percent gain; and the Chicago area gaining 5,400 jobs for a 4 percent rise. 

    Besides New York City, the metro areas seeing the largest drops in construction employment from August 2024 to August 2025 include the Riverside-San Bernardino-Ontario, Calif. area which lost 6,500 jobs for a 6 percent drop; the Los Angeles-Long Beach-Glendale, Calif. area dropping 6,000 jobs for a 6 percent decline; and the Baton Rouge, La. area, which was down 5,700 jobs in an 11 percent decline. 


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    David Winzelberg

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  • Do You Know How to Lose? 4 Principles for Cutting Your Losses | Entrepreneur

    Do You Know How to Lose? 4 Principles for Cutting Your Losses | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    I’m a great loser. Before I explain just how good I am at it — and why you should work at it, too — you need to know two things about me:

    First, I’m a day trader. Much of the investing world values the long-term “buy and hold” strategy. Warren Buffett is the most famous example, and he’s done well. In contrast, the very definition of day trading is that you cannot hold any positions overnight. In my case, I rarely hold trades for even hours. My average hold time over my last 20,000 trades has been about five minutes.

    The second thing to know is I’ve built both my day trading account and my information business by self-funding them. Much of the business world values leverage. It’s the notion that if you really believe in your business, you should take on debt or get equity partners. “You’re either growing or you’re dying!”

    Being a day trader and a self-funded business owner have combined to make me really good at cutting my losses. Here are four principles for cutting losses that may be useful to you, even if you have no intention of day trading.

    Related: I Turned $583 into $10 Million. Here’s How I Did It and 5 Lessons I Learned Along the Way

    1. Don’t waste your latitude just because you have it

    Currently, I could afford to lose six figures in a trade, but instead, I still trade the same way I did when my back was against the wall.

    For a little backstory, I lost a lot of money day trading until I was close to broke: I was divorced, living with my dog in Vermont, selling my furniture on Craigslist and chopping wood instead of paying for heat. In that crucible, I identified what my previous winning trades looked like and one other thing: that I was holding my losers too long. I had to cut my losses faster if I would survive.

    This is painful to do! Walking away not only removes the hope that the situation may turn around, but it goes against what we’ve all been told: “Stick with it! Don’t be a quitter! Finish the job!”

    Let’s say your situation is different: you have enough money that you can stick with a difficult situation for a while. Should you?

    I don’t know your situation, but I do know this: making the decision to quit is doubly hard when you’re in the thick of it. The best way to decide is to identify your quitting criteria upfront. In day-trading lingo, it’s your “max loss.” You are insane to take a position in a stock without knowing the point at which you absolutely must sell. That way, you don’t need to think or evaluate if that number is reached — you simply must react. If you know those criteria with the business venture you’re involved in, it will be far easier to minimize the pain if things suddenly go south for you.

    Related: Stepping Aside: When To Walk Away As A Leader

    2. Don’t let sunk costs hijack your larger perspective.

    A “sunk cost” is what you’ve already spent on a project at the point when you start to think about abandoning it. Examples might be a half-built nuclear reactor, a Pentagon project wallowing in budget over-runs — or the project that’s become a boat anchor to your business.

    You might already have spent a lot on that project, and writing it off may be painful and embarrassing, especially if only recently you were on record as optimistic. The only thing worse would be to throw even more good money after bad. You need to be willing to cut your losses.

    Here’s how it happened to me. Day traders can — and should — use a trading simulator to develop and test their trading skills without risking real money. It’s a crucial piece of software, so we decided to buy some source code to form the basis of our proprietary simulator. We customized it, and it worked quite well.

    Only it didn’t scale. The first 50 to 100 users liked it, but the system began to show signs of choking with hundreds of users. I had invested six figures in buying and modifying the code. Could we have rebuilt it from the ground up? Yes. But the prospect of turning it around was too far distant. I threw it away and entered a partnership with a company that specialized in simulation software. That hurt, but it was the right move.

    Related: The Sunk Cost Fallacy is Ruining Your Decisions. Here are 3 Life-Changing Lessons I’ve Learned From Pivoting

    3. Encourage feedback, but don’t let it have outsize influence on hard decisions

    Business owners want engaged employees who feel their opinions are being listened to. Sometimes, that means doing the opposite when it’s in the company’s best interest.

    There have been times when I had gut intuitions about what we needed to do, and my team was like: “This is way too much! How are we even going to explain this when people write in?” In these cases, I tell them: “I have confidence that you’re going to figure it out.” My job is to solve what will work long term, and other team members must solve the challenges in their areas.

    Related: How Business Leaders Can Keep Employees Engaged

    4. Protracted losses have compound effects

    When you don’t cut your losses quickly, that’s an opportunity cost: you’ve spent time managing the loser when you could have redirected that time and money to other opportunities. But an extended loss has another downside: it shakes your confidence for weeks or even longer. In contrast, a quick decision to cut a loss can be a confidence builder.

    Making decisions is like exercising a muscle. Some decisions are easy, like where to eat. But when faced with a tough one involving losses, consider using that muscle, feeling the pain, and doing it anyway. You’ll be that much stronger.

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    Ross Cameron

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