How Do You Calculate Your Severance Pay Tax?
To calculate the taxes on severance pay, use a tax calculator such as the one provided at HRBlock.com. Severance pay is considered part of an employee’s income and is fully taxed based on the employee’s tax rate, states IRS.com.
To calculate the taxes owed on severance pay, follow the steps below.
- Visit the financial website
- Complete the About section
- Complete the Income section
- Complete the Expenses section
- View the tax
Go to HRBlock.com. Click on Get Answers in the upper right, and then click on the link to the tax calculators.
Select the filing status and number of dependents. Click to Continue. Enter the date of birth and click to the next page.
Select all sources of income. Choose Employment (W-2) for severance pay. Complete all required information and click to save.
Choose all expenses to be claimed and complete the required information. Click Skip Expenses if there are no expenses.
Submit the information to view the estimated taxes that need to be paid on the severance pay. If more taxes were taken out by the employer than what needed to be paid, an estimated refund displays.
Severance pay is also subject to the Federal Insurance Contributions Act, notes Forbes.com. As of 2015, employees pay 6.2 percent of their paychecks to the Social Security tax and 1.45 percent of their paychecks to the Medicare tax. The employer pays these amounts for each employee in addition.
