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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I was taxed at the following rate severance payout: 37.6%

Customer Question

I was taxed at the following rate for my severance payout:
37.6% Federal
11 % SS, Medicare, State
This rate I was taxed isn't my standard 25%, a flat rate of 25%, or the 39.6% for over a million (which I didn't earn).
Submitted: 7 months ago.
Category: Tax
Expert:  Lev replied 7 months ago.
First of all - you are not taxed separately on the severance payout...Your tax liability is determined on your TOTAL income, filing status, deductions, etc - and is calculated on your tax return.Whatever you see - that is withholding - not tax liability.Withholding will be credited toward your tax liability on your tax return.So if withholding is more than your actual tax liability - you will claim a refund.Social security and Medicare taxes are generally 7.65% (6.2% social security plus 1.45% Medicare)But if your wages overpass the threshold (118,500 for 2016) - social security would not apply.Additional Medicare Tax 0.9% applies to wages, compensation, and self-employment income above a threshold ($200,000 for singles)So far - it is not clear how you have 11% for these purposes unless you added state income tax here...
Expert:  Lev replied 7 months ago.
.For income tax withholding - generally severance pay is treated as supplemental wages and withholding is at flat 25% rate.If your total annual supplemental wages are greater than $1 million, your employer must withhold tax on the amount over $1 million at the highest rate of income tax allowed by federal law (currently 39.6%).But some employers implement withholding based on total income during the pay period regardless if that is a regular periodic pay or supplemental pay - that we need to verify with your employer payroll person.