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Severance payment


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We have an employee who died this year and was entitled to a severance payment before his death. We are paying it to his estate. I looked at the instructions to Form W-2, which indicated that we (i) submit a final W-2, listing the severance payment in the social security and medicare boxes (but NOT as income), and (ii) give the estate a Form 1099, which will list the amount of the severance payment as income.

Am I understanding it correctly that the W-2 takes care of the FICA taxes and the Form 1099 makes the estate responsible for paying income tax?

Does the company still have to withhold federal income taxes on the amount of the severance payment?

thanks in advance for anyone's insights.

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Everything in your first 2 paragraphs is accurate. There is no w/h of FIT.

You need to check the pertinent income tax reporting and w/h rules for the State(s) involved.

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