Legal Question in Employment Law in Texas

Seperation Agreements in Lieu of Severance Pay

I was laid off from my employer 2 weeks ago and was paid my last 2 week check as well as my vacation time. I was also given a seperation agreement that basically states that for not bringing any wrongful termination charges or other civil claims that I can receive 2 weeks pay less any standard withholding. I have my tax(w4)deductions set at 10 as I have a large family. Would this 2 week check be taxed at this standard 10 deduction rate or at a higher rate?


Asked on 4/26/03, 9:16 pm

1 Answer from Attorneys
Roger Evans Mathis & Donheiser

Re: Seperation Agreements in Lieu of Severance Pay

Although your employer conceivably could withhold at a 28% rate because this is a lump sum payment, it is much more likely that this payment would be subject to your regular withholding. Of course, the actual tax rate (not withholding percent) applied would be the same, and you would be provided a refund of any over-withholding.

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Answered on 4/28/03, 2:05 pm


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