Accepted Answer

Hello again grinch,

Thank you for the additional information.

As a single person, the $30,000 severance check that you will receive will be taxed at a rate of 28% federal tax and 3% IL state tax. You should request that your employer withhold these percentages from this check.

Actually the employer is not supposed to even offer you the option of changing your withholding exemptions on special one time payments. Bonuses or severance pay are considered by the IRS to be supplemental wages, and payments of supplemental wages should be taxed at a special rate of at least 25%, as that is what the IRS requires. You may, however, request a higher rate of withholding if you think you need more tax withheld to cover what you would owe.

You should not need to actually fill out a new W-4 form for the employer to cover the withholding on this check. Simply tell them to withhold federal tax at the rate of 28% and IL state tax at the rate of 3%, and this will cover what you owe on this payment.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you grinch

Expert:	Merlo
Pos. Feedback:	99.8 %
Accepts:
Answered:	10/27/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad