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Severance Payments

After a recent layoff, I have started receiving severance payments from my employer. The payments are weekly, the same gross amount as when I was employed. But these payments are being taxed at a higher rate. As far as I understand severance is only taxed differently if paid in a lump sum (due to tax year estimating). When I reach out to payroll, they only respond with “severance pay is taxed higher”. 
I am in Georgia, the severance agreement states that “payments are to be made for 12 weeks equaling last recorded salary gross pay for a total of $****”. 
Is there something I am missing? Or do I get the tax difference back when I file? Just doesn’t sound like they are applying the taxes correctly. 

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1 Best answer

Accepted Solutions
dmertz
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

Severance Payments

Severance pay is considered to be supplemental wages.  If not paid concurrently with regular wages the employer will generally withhold federal taxes at a flat 22% as instructed in IRS Pub 15.  As VolvoGirl said, any excess tax withholding determined on your tax return for the year will become your tax refund.

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2 Replies

Severance Payments

That is just withholding to cover the tax.  Yes you can get a refund if your total withholding for the year is more than the tax on all your income.  

dmertz
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

Severance Payments

Severance pay is considered to be supplemental wages.  If not paid concurrently with regular wages the employer will generally withhold federal taxes at a flat 22% as instructed in IRS Pub 15.  As VolvoGirl said, any excess tax withholding determined on your tax return for the year will become your tax refund.

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