Severance pay taxes?
Do federal, state, and social security taxes have to be taken out of the severance pay?
1 answer | asked Jul 27, 2001 12:48 PM [EST] | applies to New York
Answers (1)
Deducting Taxes from Severance Pay
This is really a question that should be directed at a tax attorney. However, my experience is that employers will almost always insist on deducting income and social security taxes from severance payments because of a fear that they will be liable for the taxes if the employee fails to pay, and may face penalties even if the employee reports the income. Now, I have not gone through IRS regulations to see whether this is true, but based on other secondary material the employers may have a genuine basis for concern. Thus, the answer to your question is probably yes.
posted by David M. Lira | Jul 31, 2001 4:25 PM [EST]
This is really a question that should be directed at a tax attorney. However, my experience is that employers will almost always insist on deducting income and social security taxes from severance payments because of a fear that they will be liable for the taxes if the employee fails to pay, and may face penalties even if the employee reports the income. Now, I have not gone through IRS regulations to see whether this is true, but based on other secondary material the employers may have a genuine basis for concern. Thus, the answer to your question is probably yes.
posted by David M. Lira | Jul 31, 2001 4:25 PM [EST]
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