Any advice for changing tax exemptions for a lump-sum severance package?

Any advice for changing tax exemptions for a lump-sum severance package?

by Nicholas J. Crocetti, CPA | Oct 20, 2017

I have a question on the taxes for a lump-sum severance package. My HR rep said I may want to change my tax exemptions prior to the payout, but I don't want to end up creating a scenario where I will have to pay more next April. Any advice? 

Your HR representative may be correct. You should do a projection of your tax liabilities for 2017, for federal, state, and local income taxes. After completing the projection, you should review the projected withholding of federal, state, and local income taxes. If your present estimated withholding does not cover your liabilities, you should either increase your withholdings or pay estimated taxes to avoid potential penalties. Your CPA can provide you with the appropriate details. 
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Answered by: Nicholas J. Crocetti, CPA, is director of tax advisory solutions with CBIZ MHM LLC in Plymouth Meeting, Pa.
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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