"Government do take a bite, don't she?"
Posted on 07/05/2016 7:45:32 PM PDT by George from New England
Th3e company is always right on these matters. It’s the national government idolized by the people which does these things.
How about an $11,000.00 income tax fund?
I had no thought of browbeating my former employer for tax withheld as per IRS rules. I waited to file and got it back. I will admit that I also had nine months severance after 31 years of employment instead of six weeks which has allowed me to retire before my retirement age of 66 (I hope).
Someone has to pay for AF One flying Abbott & Costello around campaigning.
That my FRiend would be the supplemental withholding rate, which is usually in the neighborhood of 25%. All lump sum, non-hourly or salary compensation receives this withholding rate. So just imagine if every paycheck you received was a commission or bonus type pay.... Again, not quite correct.
They have to take out FIT based on your W4 and the gross amount. No. Supplemental pay such as commission or severance pay can be taxed at either the 25% withholding rate or using the aggregate method if applicable.
The employer has the choice to do a flat 25% withholding (1a) or calculate withholding if this was a continued wage payment (1b), albeit a hefty one. See Publication 15, pages 18 and 19. Most employers don’t take the complicated route and use method 1a. They were NOT forced into how to do this.
NonValueAdded gave the only correct answer.
“Supplemental wages are all wages that are not regular wages. Stated differently, supplemental wages are wages that vary from payroll period to payroll period based on factors other than the amount of time worked. Examples of supplemental wages are (severance) overtime pay, bonuses, back pay, commissions, wages paid under reimbursement or other expense allowance arrangements, nonqualified deferred compensation, noncash fringe benefits, sick pay paid by a third party as an agent of the employer, amounts includible in gross income under IRC section 409A, income recognized on the exercise of a nonstatutory stock option and imputed income for health coverage for a nondependent.”
“If the amount of supplemental wages paid in any calendar year exceeds $1 million in the aggregate, withholding is at a mandatory 35 percent rate on the amount more than $1 million, and optional for the payment that causes the total of all supplemental wages in the year to cross the $1 million threshold. If supplemental wages are less than $1 million, the employer may generally choose to use either:”
- the optional (25 percent) flat rate; or
- the aggregate method.
“The optional 25 percent flat rate method may not be used, however, unless income tax has been withheld from the employee's regular wages during the calendar year of the payment of the supplemental wages or the preceding calendar year, and the supplemental wages are separately stated from regular wages (in addition to being less than $1 million).”
“If all the requirements for the optional 25 percent flat rate method are not met, then the aggregate method must be used. To calculate the aggregate method, supplemental wages are added to regular wages for the most recent payroll period this year as if they were a single payment. The tax is then determined on the single payment based on the tax tables for the appropriate payroll period and using the employee's IRS Form W-4. The tax already withheld from the regular wages is then subtracted, and the remaining tax is subtracted from the supplemental wages. The IRS has advised that when there are no regular wages and supplemental wages must be paid using the aggregate method, the daily/miscellaneous table should be used when there are no other regular wages paid in the same year. This is common, for example, when back pay is paid to a former employee in settlement of litigation.”
Also see step 7 here:
http://www.xperthr.com/how-to/how-to-pay-an-employees-final-wages/20917/
And
I am not clear from your post George, what method your employer used here - the flat 25% withholding or the aggregate method but either method would be correct since you had wages in the calendar year and it is the employer’s choice as to which method to use.
I am also not clear why “normal FITW bi-weekly at this salary is $0.” Is that because the number of exemptions on your W-4 were high enough and your regular bi-weekly pay low enough as to not trigger FIT? If so keep in mind that paying out your 6 weeks of severance in lump sum using the aggregate method would likely put you in a higher tax withholding bracket and may have triggered the $289 of FIT withholding. FWIW since it was paid out in a lump sum, they would not withhold as if it was wages paid out over a course of 6 weeks instead of 2 weeks.
Same thing happened to me,
I paid for my own retraining and most of the cost was not deductible,
Never got the money back
Sorry George. Unless changed manually, payroll software programs calculate tax withholding. I hope your situation improves and new doors open.
"Government do take a bite, don't she?"
It has a higher tax rate...
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