Can't Seem To Do Math! Help!

[trippypea]

My brain is mush today trying to figure out how to adjust withholding now that DH is unemployed and his severance payments are being taxed at 22%. Can someone help me?

I had anticipated his severance paychecks to be more since they wouldn't be deducting for benefits, but they are actually $200 less. So I want to adjust withholding so that less money is taken out in taxes since we still have to pay for health insurance.

We currently claim 0 allowances and end up with what is probably considered too big of a refund every year ($3500-$4000). Paying an additional $6000+ in federal taxes on the severance payments is going to make for a huge refund in 2021 if we do nothing.

1) Are we able to ask the employer to change the withholding by a dollar amount to make it so less is being withheld? For example, if $350 was being deducted before and $850 is being deducted now, can you tell them to withhold $350 and it balances out?

For the life of me, I can't figure it out.

[Deleted]

Can you adjust withholding on severance checks?  I thought it was automatically withheld at the bonus rate of 22% and it didn't matter what was on your W4? 

[jeffreymo]

The new 2020 form will probably further complicate this since it no longer accounts for allowances. It’s so new that I haven’t tested it out, but you could try starting off with your status as MFJ on the W4 and everything else blank.

There are 2 new fields that could possibly be used to reduce withholding - in the claim dependents section.

You would first have to see what the MFJ-Blank produces in terms of withholding.

*Once you understood that withholding amount you could use the dependents section to reduce your annual withholding by $2000 for each child dependent or $500 x for each other dependent.

*too early to tell if this would be permissible




ETA: I believe only lump sum severance payments are withheld at the supplemental rate of 22%. A wage continuation where he’s receiving regular “paychecks” should be using his W-4 elections

[CCL]

Are you still employed now? It might be simpler to change the withholding on your paychecks.

[alabamagal]

First, I don’t think you can change his, it will be 22% Federal. But if they let you, go ahead

Adjust your withholding if you are working. Don’t be afraid to make it so that it is 0. I had years where I owed no Fed tax due to low income and 2 or 3 kids eligible for college tax credit. I think I claimed M-10 (I did have 3 kids). Even if you undetwithhold now, it is only January you can adjust later, and if they are taxing severance at 22%, you should be pretty close.

Best way to figure out how much to withhold is estimate your taxes remaining for year (best done mid year or later) then go to online paycheck calculator (google it). Then you enter your pay and other quick info and adjust your withholding rate until you get it where you want it (no math involved in that part).