Severance Ledger editorial desk
Tax & Withholding Desk
Federal & state severance tax and withholding
The Tax & Withholding Desk covers the tax mechanics of severance — how federal supplemental withholding (the 22% / 37% structure in IRS Publication 15-A), state supplemental rules, FICA, and state disability insurance (CA SDI, NJ TDI, NY DBL) interact on a payout.
This desk tracks state-by-state differences and maintains the publication's annual state severance-tax reference tables: California's 6.6% supplemental rule, New York's stacked state-plus-NYC withholding, the no-state-income-tax states (TX, FL, WA, NV, SD, TN, WY, AK, NH), and the reconciliation mechanics that determine what recipients actually owe at filing. Articles cite IRS publications and state revenue codes by section, and are refreshed each January as rates and limits change.
Severance Ledger does not provide tax advice. Readers should consult a CPA or tax attorney for guidance specific to their situation.
Editorial focus areas
- Federal & state severance tax mechanics
- Supplemental withholding rules
- FICA, SDI, TDI, DBL on severance
- Reconciliation at filing time
Articles from the Tax & Withholding Desk
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Withheld at 22%, Taxed at 32%: The Severance Reconciliation Gap in 2026
The flat 22% federal withholding on severance under-collects for everyone above the 22% bracket — often $5,000 to $30,000 due at filing. The gap in dollars, the Form 1040-ES safe harbors that switch off the underpayment penalty, and the installment timing that moves the $1 million threshold.
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Severance Tax Rate in Texas 2026: No State Income Tax Doesn't Mean No Tax
Texas has no state income tax, but Texas severance is still subject to federal supplemental withholding, FICA, and the state's specific rules for how severance interacts with unemployment claims. Here's the actual math and the source-state issue that catches remote workers.
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Severance Tax Rate in New York 2026: The Stacked Withholding Decoded
New York stacks state, city, and federal supplemental withholding on severance, producing combined rates near 40% for typical white-collar separations. Here's how the math actually works, what NYC residency triggers, and what reconciles at tax-filing time.