Have a Tax Question? Ask a Tax Expert
Severance pay is seen as supplemental wages by the IRS.
If supplemental wages are less than $1 million, the employer may generally choose to use either:
- the optional (25 percent) flat rate; or- an aggregate method
Most employers use the 25% flat rate and changing your W4 would not change the withholding rate unfortunately.
In Revenue Ruling 2008-29, the IRS has provided specific guidance on the proper amount of federal income tax an employer must withhold.
Please advise if you need more information or rating in a positive way is acceptable.
If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.