What is the rule of thumb for the severance state taxation if a person worked in one or more states than the residence. I understand the person won't be taxed twice where one state tax can potentially be a credit for the other. I am worried that if the tax goes to the state where I was working last, the state where I live might have an issue. I could call the state and ask them, but so far no one is able to give me a straight answer. Any help will be greatly appreciated.
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If you have worked in one state and lived in another in the past, the severance will be treated the same as you have been treated in the past. Usually it will be considered as 'earned' in the state you were working. I wouldn't worry too much about it - you won't be able to avoid taxes, as the state where it was earned will come after you for the money they believe they are owed.
States treat severance pay differently. Some consider it taxable income while others do not. In either case you will get a credit in your home state for paying another state. Your w2 should have the state records as to what was withheld.