How does it work ?
6 replies (most recent on top)
|IIRC, all of the lump sum payments as part of your severance (pay in lieu of notice, severance pay, accrued but unused PTO, & COBRA payments) are taxed at the highest tax rate
My severance pay lump sum was taxed at about 22% (below my tax bracket.) My COBRA was taxed at about 34% (beyond my tax bracket.) Pay in lieu was taxed at 24% (also below my federal income tax bracket.) What I'm I missing?
| I noticed my medical lump sum pay out was taxed. Is this normal and to be expected?
Yes. It was "grossed up" to adjust for taxes.
| You can adjust your W-4 withholding before it is paid out.
Good luck w/ that. HR told me they were too busy dealing w/ questions and other paperwork associated w/ the LR that they could not process the adjustments in time.
IIRC, all of the lump sum payments as part of your severance (pay in lieu of notice, severance pay, accrued but unused PTO, & COBRA payments) are taxed at the highest tax rate. It usually results in a tax refund for that tax year because they over withheld.
I thought ESPP payments were taxed. If you hadn't withheld that money for ESPP payments, it would have been part of your paycheck and therefore taxed. But I don't recall and I don't feel like pulling out my old pay stubs.
I noticed my medical lump sum pay out was taxed. Is this normal and to be expected?
Cobra payments are netted up to cover your tax liability.
Income is income in the US. Your PTO balance and severance will be taxed accordingly. Any accrued ESPP contributions will be refunded with no tax. It is paid at one time, so the chance for overwithholding exists. Talk to your accountant if it is a concern. You can adjust your W-4 withholding before it is paid out.
which country?
HR can calculate that and give you final payout.