It is my understanding that all severance pay will be taxed similarly to annual bonuses (around 22% federal + state/ss/medicare, totaling somewhere around 35-45% in NY). Are there circumstances where employees can opt to reduce the amount of taxes taken up front? Can anyone speak to this? Any HR reps in here?
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Yes, in a way you can. If you plan to take the package, go in now and cancel the 401K deductions or any other "voluntary" deductions that you can cancel. Then update your W4 to change how much is withdrawn each paycheck so they pull out less each paycheck. Only "defers" if they don't get enough out this year and you pay on April 15. And yes, they will usually keep all your deductions (401K, HSA, medical/benefits) on your last paycheck if you do not do this. Do not cancel your medical/insurance because it may impact the Cobra offering. Not ideal, but its worth doing. Been RIF'd in last 2 jobs and this is what I have done. It does tax higher if it is one lump sum rather than paying out over x number of pay periods
You could reduce the year end tax bill by contributing to tax deductible accounts like HSA, IRA. You will have to do that outside of the payroll. I don't anticipate 401k contributions will be deducted from the lump sum.
HSA contribution is particularly good as you can contribute pre-tax, and then use the money to pay COBRA costs and other medical expenses and not pay tax on the money.
You just have to send the money directly to Optum. There are annual limits, so investigate them and how much you have contributed, so you don't go over the limit.
@a6 My goodness JG, what are you even talking about? The ask was simple, do people have an option to reduce the amount of taxes taken UPFRONT. Income? I am aware. I did not ask to get out of paying completely nor did I ask why they were being taken out. In fact, at no point did I express confusion or ask you to splain’ anything fam. Just curious as to whether the chunk that gets taken out can be deferred at all. Grateful I don’t work alongside you though, you sound quite miserable. Although, I’d probably be miserable too if my comprehension skills were as limited as yours.
I'd be willing to bet you don't work in HR. Yikes: tone + "... if you were a DEI hire" 👀
@OP Yes I work in HR, why is this so surprising? It's INCOME, thus the term Income Tax. Yes, it will be taxed at the same rate (Fed and State) and get this...if the payout puts you in a higher tax bracket for the year, you're gonna pay even more.
See...let me splain Lucy, these taxes actually pay for the Medicaid, Medicare and the ACA programs being cut, the programs most everyone on this board is upset about.
Put it all together now! So, no there is no way to "opt out". Uncle Sam is going to get this money from you! Wait...don't you want to help fund Medicare, Medicaid and the ACA with your taxes???
Weird how so many people who love these programs don't want to pay the taxes it takes to keep them afloat!!!
As Obama used to say...pay your fair share! Also, if you don't take the deal you're most likely going to be RIF'd, especially if you were a DEI hire or serve no purpose.
Centene leadership represents the stockholders...not you! Get it?