Why was 58% of my severance payment withheld in taxes?

Thank you for explaining this. So if I'm understanding correctly, my company didn't necessarily do anything wrong by withholding that much? It seems excessive to me, but I guess if that's standard practice then I just have to deal with it. Do you know if there's any way I can estimate how much I might get back when I file next year? My total income for 2025 is going to be a lot lower than normal since I'm out of work right now.

Your company is following standard withholding rules, so they're not doing anything wrong. The system is set up to withhold on the assumption this payment could push you into a higher bracket, but since you're now unemployed, you'll likely get a good chunk back. You can estimate your potential refund by looking at your expected total income for 2025, including this severance and any new job income, then checking the tax brackets online. Since your annual income will be lower than if you'd worked the full year, your effective tax rate will likely be lower than what was withheld. Just make sure to file in early 2026 to get that money back as soon as possible.

Does this tax assistant thing actually connect to the IRS or is it just giving generic advice? I'm always hesitant to share my financial info with random websites. Also, how accurate was the estimate it gave you compared to what you actually got back when you filed?

I'm a bit confused about how this works. Is this something that would replace talking to an actual accountant? My severance situation is complicated because my company also paid out unused vacation time and a bonus in the same payment, and I have no idea how to separate what was taxed at what rate.

The tool doesn't connect directly to the IRS - it just analyzes the documents you upload and explains what's happening based on current tax laws. I was hesitant too, but their privacy policy was solid and they use encryption for all uploads. The estimate was pretty close - within about $200 of my actual refund. For complicated situations with multiple payment types in one severance package, it's actually perfect for that. It helped me understand how my unused PTO was taxed differently than my actual severance payment. It won't replace an accountant for super complex situations, but for understanding your withholdings and getting a solid estimate of your refund, it worked great for me.

Wait, how does this Claimyr thing work? I thought it was impossible to talk to a real person at the IRS without waiting for hours. Did they just put you at the front of the phone queue somehow?

This sounds like a scam. Why would anyone be able to get you through to the IRS faster than you could yourself? And why would you pay for something like this when you can just call the IRS directly for free? I've called the IRS before and while it took a while, I eventually got through to someone.

It uses an automated system that navigates the IRS phone tree and waits on hold for you. When an agent actually answers, you get a call back connecting you directly to them. It's basically skipping the holding part, not cutting the actual line. They absolutely can't make the IRS prioritize your call over others - no one can do that. They just eliminate the part where you personally have to listen to hold music for hours. I was skeptical too, but after trying to get through for three days and always getting the "call volume too high" message, I was desperate. The service was worth it to me because my issue was time-sensitive, and I had already wasted so much time trying to call myself.

This is a great point! I just double-checked my statement and you're right - they continued some deductions that shouldn't apply anymore. They took out for the company gym membership and transit pass, which obviously I won't be using. That only accounts for about $120 though, so there's still a lot missing. But at least it's something I can definitely get refunded! I'll email HR about this specifically. Thanks for the suggestion.

Happy to help! Those little deductions can definitely add up. Don't be afraid to push back on HR about this - sometimes they just apply the standard deduction template and don't think about what makes sense for someone who's leaving. Also, check if they deducted for any portion of benefits that you had already paid for in advance. Companies occasionally forget to prorate things like annual professional memberships or training programs that you've already paid for partially through payroll deductions.

I chose the multiple payment option when I was laid off last year, and it definitely helped with the tax withholding situation. When they break it up, each payment is smaller, so the withholding system doesn't treat each payment as if you're suddenly in a super high tax bracket. The downside is that you're at the mercy of the company continuing to make those payments. If they have financial troubles, your later payments could be at risk. Also, some benefits might end after the first payment rather than continuing through all payments, depending on your severance agreement.

Thanks for sharing your experience! That's exactly what I was hoping would happen with the taxes. I'm not too worried about the company's financial stability, they're pretty large. Did you notice any difference in how your final tax return worked out? Did you still get a refund even with the lower withholding on the multiple payments?