I received regular wages from my company in 2022 and a severance paid out same year. The severance package was taxed at the supplemental rate of 22%. On my W-2 the severance amount is not reported separately. Turbotax then expects that I didn't pay the right % of withholding on the severance portion of my wages and instead my actual withholding amount. There seems to be no way to report it in Turbotax since it's not a separate form. I don't see how the IRS would know that this amount was not regular wages since it is not reported as such on the W-2.
Is there a way to report the wages as separate in turbotax so I am not responsible for taxes that are significantly above what I actually owe?
I did find this article on turbotax and it falls in the under $1 M range. The company I worked for chose option 1 below without reporting correctly. Thanks!
Supplemental wages of $1 million or less
If your supplemental wages are $1 million or less, the withholding rate depends upon how your supplemental wages are paid.
- If your employer does not designate your pay as supplemental wages and includes it with your regular wages, the supplemental withholding rate does not apply and taxes are withheld using the information you provided on Form W-4.
- If your supplemental wages are identified separately from your salary (as a bonus, for example), your employer must withhold taxes using one of the following two methods:
- Withhold at the supplemental rate of 22 percent or
- Combine your regular wages for the pay period with your supplemental wages and treat the total as one payment of regular wages and then withhold taxes using ordinary withholding rates.
