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New Member
posted Apr 28, 2021 5:29:56 PM

I received severance pay due to a force reduction, but it was taxed and is not itemized on my W2. What do I file to exempt part of my pay from income tax?

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2 Replies
Level 15
Apr 28, 2021 5:45:24 PM

Why would you think your pay is exempt from income tax? Everything your employer pays you in return for your services, including severance pay, is taxable income and must be reported on your W-2. It must be reported as taxable wages in box 1 and subject to Social Security and Medicare withholding in boxes 3 and 5.

Level 15
Apr 28, 2021 5:55:31 PM

"I received severance pay due to a force reduction, but it was taxed and is not itemized on my W2".

 

Your total pay, including severance, is shown in box 1 of your W-2.  The severance was not "taxed". Instead there was just withholding (an estimate of the tax). The severance withholding has been added to your regular pay income tax  withholding and shown in box 2 of the W-2.   Social security tax withholding in in box 4 and Medicare withholding in box 6. 

 

No piece of income, including severance,  is taxed individually.  All your income is added together at tax filing time. The tax is calculated on that total (after adjustments, deductions, exemptions and credits). Then withholding is subtracted to determine if you owe more or get a refund.