Stupid question. Wondering how severance is taxed when I receive it after my final day in August. Is it the same as our biweekly pay? Does anyone know? I hope it's not like our bonus which taxes so much
TIA
4 replies (most recent on top)
2 RIFs ago they taxed 25%, held taxes for the RSUs that were taxed again when the vest occurred, held the full benefits amount, and all the state, 401k taxes, etc. I got less than 1/2 the severance. At taxed time, none of that came back because of how they listed the taxes on the W2 form. It was totally sc--wed. Better get a good tax accountant to fix it or be out thousands come tax time.
As other posters mentioned, it is taxed around 22%.
If you have RSUs that you are keeping, additional money will be taken out of your lump sum to cover the taxes on those as well. All in all, my deductions were ~1/3 of the total amount.
It's exactly like your bonus
Severance payments are considered supplemental income and will be taxed at the supplemental tax rate, which is 22% for Federal income tax. State supplemental tax differs by state.