tax tip

this is a genuine suggestion. but I am not a tax professional. use your own discretion.

here's a tip in case it becomes relevant: as soon as you find out you're laid off, update your W4 to "exempt". the company will pay you a lump sum of $x as severance, but the government will tax you as though that amt were a regular pay check. so instead of your regular taxes, they'll take like 50%. if you change your tax status to exempt, they won't. then just look at your most recent pay stub to find out how much tax you normally pay, multiply that by the number of pay periods you got, and set that amt aside for tax time. (ex., if you get 8 weeks' severance, that's 4 pay periods. if you pay $100 in tax per pay stub, put aside $400.)

I happened to know about it because it happened to my brother. he changed it to like 10 dependents, but it still wasn't enough. he was told he should have changed it to exempt, but nobody told him that until AFTER they gobbled up his severance.

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This is TERRIBLE advice. Please don't take tax advice from strangers on the internet bc someone’s brother supposedly gamed the system - signed your friendly certified financial analyst.

Great experts on this site. NOT! Can anyone provide instructions for creating nuclear fusion from a toaster?

So much miss information here. First off- a lock in letter will only be issued after 2-3 years of owing a lot of monies on your taxes. So no chance of this event triggering that. #2- you aren’t really kicking a can down the road because a lump sum severance is taxed at a much higher rate since it isn’t considered wages but is considered additional income. However when you file at the end of the year the system doesn’t differentiate and all monies are added to place you on a tax bracket where your tax liability is determined. #3 if you claim exempt, and put the correct amount aside(instead of the higher rate which you would get in a refund most likely when you file) you can make what is called a quarterly estimated tax payment. This is what self employed people do to avoid penalties and bills at the end of the year. Jesus people it’s okay to say you aren’t sure or don’t know. But it’s not okay to come across as if you actually know what you are talking about when someone is asking for help that might impact their financial status. No I am not a tax attorney, but I do play one on TV lol. Seriously though before making any decisions talk to a true licensed professional to help guide your decision. Best of luck!

The dependents game has not worked for quite some time. This will not discontinue deductions for FICA or state taxes. Also if you are not expecting a fed refund next tax season just set yourself up for late penalties on the taxes you did not pay on the lump sum severance. If so short on cash now with no job where is this magic money going to come from by april 2025. Odds are in this market you wont have a replacement job in time to pay your federal bill so just kicked the can down the road and made a bigger hole for yourself.

But did you stay at a Holiday Inn?

And when the feds notice and send a lock-in notice to wherever you end up next, you won’t be able to do it again.

I do that whenever it’s bonus time or if I need some extra cash. I always get a refund on taxes so it doesn’t affect me owing.

Assume I will make $40,000 for lump sum severance. Which is $10,000 bi-weekly for up to 4 pay periods. And let's say taxes per pay period are normally 30% which is $10,000$30%=$3000 in taxes or $30004 pay periods = $12,000 total in taxes and $28,000 in my pocket after taxes.
So now if I change to "exempt", I have to pay 50% *10,000=$5000 in taxes per pay period?
Can you use my example and explain the total amount I would have to pay in taxes if I change the W4 to exempt? Thank You!

Thread regarding Optum layoffs

tax tip

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