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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4673
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I am receiving a severance payment from my employer. Being

Customer Question

I am receiving a severance payment from my employer. Being withheld from this lump sum payment are regular Federal & State taxes which I understand, the withholding I don't understand is also a 25% Federal Special Payment Withholding that I don't want to happen unless it is really required by law.
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

Hi from Just Answer. I'mCustomer I'll assist.

Expert:  PDtax replied 1 year ago.

Your employer is incorrect. The Federal withholding can be done at regular income tax rates OR the 25% rate, but not both.

Which rate is used depends on the type of income, and amount, paid to you in 2016. Most people will find regular income tax withholding will be appropriate.

IRS published Revenue Ruling 2008-29 to outline the applicable choices for severence pay withholdings. summarizes the Rev ruling in plainer language, so you can review the specifics applicable to your specific situation.

To dispute the employer position, you might want to present them with the Rev Ruling and your analysis of which withholding is appropriate.

Thanks for asking at Just Answer. Positive feedback, when you rate my assistance, is appreciated. I'mCustomer

Expert:  PDtax replied 1 year ago.

I tried to accept your phone call request.