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.
Tax & Withholding Desk