Are Severance Payments Subject to FICA Tax in 2025?

Old-school assumptions vs 2025 payroll reality

Old-school thinking said severance was a clean exit check, handshake, cardboard box, lump sum, and you’re out. No messy payroll stuff. That view still hangs around, and I get why. For years, CFOs and HR folks treated severance like a separate payout bucket. But 2025 payroll reality? Unless you’ve set things up very intentionally, severance is wages for payroll tax purposes, full stop. The default switch is “tax like regular pay,” and payoll systems are more aggressive about that than ever.

Here’s the anchor point in black and white: in 2014 the U.S. Supreme Court ruled in United States v. Quality Stores, Inc., 572 U.S. 141, that most severance payments are “wages” for FICA. That means 6.2% Social Security (employee) up to the year’s wage base and 1.45% Medicare, plus the employer match. For 2025, the Social Security wage base is $174,900 (SSA), so severance paid after someone already hit that cap won’t owe more Social Security, Medicare still applies, and the Additional Medicare Tax of 0.9% kicks in for employees over $200,000 in wages. Not new news, but it’s the part that bites when people expect a larger net.

Short version: Unless it’s a compliant SUB (Supplemental Unemployment Benefit) arrangement, paid periodically, tied to state unemployment eligibility, often from a trust, severance is FICA-taxable in 2025. Lump-sum severance without that structure? Treated like wages.

Automation is making the gap between “what we intended” and “what happened” wider. Most payroll engines default to supplemental wage rules, which means federal income tax withholding at the flat 22% rate (and 37% on supplemental amounts over $1 million in a calendar year) unless you override and your documentation supports it. The system doesn’t stop to ask if your severance memo uses the word “SUB.” It sees earnings code, it withholds. And yea, it’ll do it consistently at 2 a.m. on a Friday before you’ve had coffee.

Why this matters right now in 2025: layoffs are still cycling through sectors, tech, media, parts of retail, and errors get expensive fast when you multiply by hundreds of impacted employees. I’ve watched finance teams eat avoidable rework because someone assumed “severance isn’t FICA.” The practical stakes:

• Net pay surprises: Employees expect a big check and see FICA + Medicare + 22% FIT withheld. Cue the “my check is short” emails.
• Compliance risk: If you skip FICA without a compliant SUB structure, you may owe back taxes, employer match, penalties, and amended 941s.
• Refund windows: If you did over-withhold, the clock matters. Employment tax corrections generally run on a three-year statute from the date the Form 941 was filed (or two years from payment, if later). Miss that? Refunds get hard.

Okay, real talk, this part gets me weirdly excited because it’s fixable with design. If HR, payroll, and legal align up front, you can choose: standard severance taxed like wages (simple, predictable) or a properly documented SUB plan that avoids FICA. The latter only works if you meet the technical rules, periodic payments, linkage to unemployment eligibility, trust funding in many designs. One missing element and… you’re back in wage land.

We’ll walk through what this means for your models and your employees’ expectations, with a few templates you can borrow. And if this all feels like a lot, it is. I’ve been in rooms where we thought we had the coding right and then Workday… well, it didn’t. Anyway, the point: 2025 is not the year to assume severance behaves like a bonus or like a special check outside payroll. It behaves like wages unless you prove otherwise, on paper and in the system. That’s where we’re going next, how to set expectations, structure payments, and avoid rework that eats your quarter.

What the law actually says (and why most severance is FICA wages)

Here’s the short version, without the footnotes. In United States v. Quality Stores, Inc. (2014), the Supreme Court said severance payments are generally “wages” for FICA. That’s the baseline, and it’s still the baseline in 2025. The Court looked at the definition of wages in IRC §3121(a) and basically said: if you’re paying former employees because of their employment, that’s wages for Social Security and Medicare taxes. Period. The Sixth Circuit’s earlier taxpayer-friendly view got reversed.

The IRS has been on that page for a long time. IRS guidance (think Rev. Rul. 90-72 and Pub. 15/Circular E) treats most severance as FICA-taxable. The only notable carve-out is properly structured SUB pay (Supplemental Unemployment Benefit) that hits specific technical gates, paid periodically, tied to unemployment eligibility, funded as required in the design. Miss those gates and the IRS sees wages. Nothing that happened this year changed that. No new regs, no surprise memos. Payroll vendors haven’t changed their defaults either, and trust me, they would if the rule moved.

Practical translation: if you cut a lump-sum severance check through payroll, assume FICA applies unless your plan documents and payment mechanics scream “SUB plan” in all caps.

So what taxes are we actually talking about? Two buckets under FICA, same as your regular pay stub:

• Social Security (OASDI) at 6.2% employee + 6.2% employer, applied only up to the annual wage base for the year (the SSA sets the cap each year; once an employee’s year-to-date wages hit the cap, no more OASDI for the rest of the year).
• Medicare at 1.45% employee + 1.45% employer with no cap. On top of that, employees pay the Additional Medicare Tax of 0.9% on wages above $200,000 in a calendar year (that’s an employee-only surtax; employers don’t match it). That $200,000 threshold comes straight from IRC §3101(b)(2) and hasn’t moved.

One operational wrinkle we see a lot during restructuring waves, like the ones still popping up this year as CFOs chase margin with rates elevated and demand a little choppy, is the Social Security cap coordination. If you terminate people mid-year, many haven’t yet hit the wage base. That means a severance payout will drag OASDI with it. But if you lay off high earners in Q4, they might already be over the cap, so only Medicare (plus possible Additional Medicare) applies. I’ve watched finance teams over-accrue employer FICA by assuming worst-case on every check, clean it up with a simple YTD wage audit before you book the severance accrual.

Two more plain-English anchors you can share with HR and Legal without starting a debate club: (1) The Supreme Court said severance is wages for FICA in 2014 and never walked it back. (2) The IRS still says severance is wages in Pub. 15 for 2025, and still points to Rev. Rul. 90-72 for when SUB plans can avoid FICA. If you want out of FICA, you need the SUB plan design and the mechanics to match. If not, you’re in wage land, which, honestly, is fine as long as you plan for OASDI, Medicare, and that 0.9% Additional Medicare over $200k.

The narrow SUB-pay exception: when severance can avoid FICA

There’s exactly one well-worn path to keep severance out of FICA this year: a bona fide Supplemental Unemployment Benefit (SUB) plan that follows IRS Rev. Rul. 90-72. It’s not new, Rev. Rul. 90-72 has been around since 1990, and the IRS still cites it in Pub. 15 (2025), but the execution is where companies stumble. The takeaway is simple: if your payments are tied to state unemployment eligibility and paid periodically while the person is unemployed, they can be exempt from FICA. If they aren’t, you’re back in wage territory per the Supreme Court’s 2014 Quality Stores decision.

Rev. Rul. 90-72 says SUB pay isn’t “wages” for FICA if amounts are linked to state unemployment compensation, paid because of involuntary separation (not for quitting/misconduct), and made in periodic installments rather than a lump sum or salary continuation.

Core design features the IRS and case law keep pointing to (yes, these still matter in 2025):

• Eligibility tied to state unemployment insurance (UI): employees must be eligible for and/or receiving state UI, and payments stop when they’re no longer eligible (e.g., they get a new job).
• Periodic payments: weekly or biweekly works; lump sums typically kill FICA exclusion.
• Not salary continuation: amounts shouldn’t look like you’re just continuing base pay for a set number of weeks regardless of UI status.
• Trigger: involuntary separation due to layoff/downsizing. Typically excludes voluntary quits, retirement windows, or terminations for misconduct.
• Administrative mechanics: verify UI eligibility (usually via attestations/certifications) and suspend payments if the state denies or the person refuses suitable work.

Why this is worth the headache? The FICA math adds up. For 2025, the Social Security wage base is $168,600 (SSA), with 6.2% OASDI and 1.45% Medicare, 7.65% combined for each of employee and employer, plus the 0.9% Additional Medicare for employees over $200,000. Avoiding FICA on a $30,000 SUB stream can save about $2,295 for the employee and $2,295 for the employer if the person is under the OASDI cap. That’s real money, especially across a large reduction-in-force.

Now, the gray stuff (where I see teams trip up this year). States handle severance differently for UI, some reduce or delay UI when severance is allocated to post-separation weeks. If your “SUB” program pays regardless of whether the state recognizes the individual as eligible, the FICA shield usually falls apart. Also, multi-state layoffs mean 8-12 different UI rules you’ll need to map, this isn’t a set-and-forget policy. I’ve sat in those Friday afternoon calls where Payroll says, “We can’t verify UI in State X fast enough,” and Legal says, “We already promised lump sums.” That’s how you end up paying FICA on something labeled “SUB.”

Common 2025 mistakes to avoid (seeing these constantly):

• Calling it “SUB” but paying a single lump sum at termination, typically FICA-taxable.
• Not tying payments to state UI eligibility, if checks continue when the employee isn’t UI-eligible, you’ve undermined the exclusion.
• Salary continuation with a fresh label, if it walks and talks like salary continuation, it’s wages.
• Including voluntary exits or misconduct separations, undercuts the “involuntary” requirement.
• Skipping documentation, no UI attestation process, no stop/start controls, no audit trail.

Practical setup tips I’ve used with clients: build a weekly or biweekly SUB schedule, require employee attestations that they remain UI-eligible (with spot checks), wire rules into payroll to suspend when eligibility ends, and script communications carefully so you’re not promising a guaranteed duration. Also, coordinate with Benefits, health subsidy language can accidentally read like salary continuation if you’re not careful.

One last real-world note: when rates are where they are and budgets are tight (and they are tight this fall), executives like the headline savings. Just be honest about the tradeoff, admin friction and uneven employee experience versus meaningful FICA savings. If you can’t operationalize the state-UI linkage, it’s cleaner to classify as wages and move on. Better a taxable, predictable program than an audit magnet with “SUB” in bold letters.

How the FICA math works on severance in 2025

Here’s the paycheck translation, no fluff. FICA has two parts you see every payday: (1) Social Security at 6.2%, which only applies up to the annual Social Security wage base, and (2) Medicare at 1.45%, which has no cap. On top of that, there’s the Additional Medicare surtax of 0.9% that kicks in on wages over $200,000 from a single employer in the same year. Employers match the 6.2% and the 1.45%, but they do not match the extra 0.9%.

So, does severance get hit? If you’re paying severance as regular wages (most companies do unless you’ve set up a compliant SUB program tied to state UI eligibility), then yes, FICA applies like a normal paycheck. Whether Social Security applies depends on that wage base cap. If your year-to-date (YTD) Social Security taxable wages already hit the 2025 wage base earlier this year, any additional severance from that same employer won’t have the 6.2% Social Security withheld. If you haven’t hit it, the 6.2% applies until you do. Medicare’s 1.45% keeps going either way.

Quick examples to make it real:

• Social Security piece: If your YTD SS-taxable wages are below the 2025 wage base, a $20,000 severance will withhold 6.2% on the portion that still fits under the cap. If you’re already at the cap, the Social Security line should be $0 on that severance.
• Medicare piece: 1.45% on the whole severance. No ceiling.
• Additional Medicare surtax: If this severance payment pushes your wages with that employer over $200,000, the amount above $200,000 gets an extra 0.9%. For example, if you’re at $195,000 and get a $20,000 severance, $15,000 is subject to the 0.9% surtax. Employers withhold it once their payroll crosses the threshold, no guesswork about your spouse’s income or your side gig.

Rules of thumb I give people: check your last pay stub for “Social Security taxable wages YTD” and “Medicare taxable wages YTD.” That tells you how much room you have before the cap and whether the 0.9% is likely to show up.

One wrinkle that trips a lot of folks: multiple employers can’t coordinate the Social Security cap. If you work two jobs, each one withholds up to the wage base independently. If that means you personally paid more than the annual Social Security limit, you claim the excess back on your federal income tax return for the year. The employer can’t fix it for you. I’ve seen this a dozen times with year-end severance when someone jumps to a new role in Q2, payroll is blind to your other W-2.

Timing matters too. A single big December check can trigger the 0.9% surtax right away, whereas spreading payments might change how much of the severance is above $200k with that employer. Not telling you to slice the payments, just know the math. This year a lot of companies are tightening belts, and payroll teams are swamped, so mistakes happen… a stray 0.9% withheld when you’re below $200k, or forgetting to stop Social Security after the cap. Catch it early by reviewing the stub.

Last point for completeness: if your severance is paid under a bona fide SUB plan linked to state unemployment eligibility, that can be exempt from FICA under current IRS guidance. But if it’s regular wages (most are), treat it like any other paycheck: 6.2% up to the cap, 1.45% on everything, and 0.9% on the slice over $200k with that employer. Simple in theory; in real life… it depends on your YTD numbers.

Withholding, reporting, and paperwork that keeps you out of trouble

Here’s the quick and slightly unglamorous stuff that actually saves you. For federal income tax, severance paid outside a SUB plan is treated as supplemental wages. Two buckets matter this year (2025): up to $1,000,000 of aggregate supplemental wages gets the flat 22% withholding rate; any supplemental wages over $1,000,000 are subject to a mandatory 37% withholding on the excess (Internal Revenue Code §3402(g), rates in effect for 2025). If payroll lumps severance in with a regular paycheck and uses the aggregate method, the tables could spit out a different number, but most HR teams stick to the 22% flat unless you cross that $1M threshold.

FICA is the part people miss because they assume “it’s not wages.” If it’s ordinary severance, it’s wages for FICA. In 2025, Social Security is 6.2% up to the wage base of $174,900 (SSA’s announced 2025 limit), and Medicare is 1.45% with no cap. Add the 0.9% Additional Medicare Tax once you pass $200,000 of Medicare wages with that employer (employer-side isn’t owed on the 0.9%). All of this shows up on Form 941 during the quarter you pay it and on the employee’s Form W-2, Box 1 for wages, Boxes 3 and 5 for Social Security/Medicare wages and the related tax boxes. If your severance is paid under a bona fide SUB plan that’s tied to state unemployment eligibility and pays periodically from employer assets (not elective deferrals), it can be exempt from FICA under current IRS guidance (see Rev. Rul. 90-72). But if it’s a lump-sum “good luck” check, assume FICA applies.

Paper trail and corrections, this is where CFOs end up calling on a Friday night. Common fixes:

• Wrong FICA treatment (e.g., SUB plan treated like wages or vice versa): you’re looking at a Form 941-X to adjust the quarter and a W-2c for the employee. Employees may also need a refund claim for employee FICA if you overwithheld and can’t correct in the same year.
• Additional Medicare miscalc: if payroll withheld the 0.9% below $200k, you can correct in-year on a subsequent payroll. After year-end, it’s usually 941-X plus W-2c.
• Social Security cap blown past the limit

Timing matters for refunds/credits. The general window to file a 941-X is the later of 3 years from the date the original Form 941 was filed or 2 years from when the tax was paid (IRC §6511; IRS instructions repeat the rule). Miss that, and your “we’ll fix it later” becomes “we won’t.” I’ve seen good teams lose dollars here during busy Q4 reductions because someone assumed the window started at year-end. It starts when the 941 was filed or when you paid, whichever controls.

States toss in their own quirks:

• Supplemental withholding rates: many states publish flat rates for supplemental wages separate from their normal tables. Some employers apply the state supplemental rate to severance by default. Check the state’s 2025 employer guide, California, New York, Ohio, and others set explicit rates that change from time to time.
• Unemployment insurance (UI): SUB plans often need the severance to coordinate with UI eligibility. If your plan structure lets someone collect both without offsets, the state may say it isn’t a compliant SUB for UI, and that can boomerang into federal FICA treatment issues.
• Local taxes: cities with wage taxes (think Philly, some Ohio municipalities) will usually follow wage treatment; severance paid as wages gets pulled in. Payroll systems sometimes skip the local box on one-off runs, cue the amended local return. Seen it twice this year already.

Reporting mechanics, plain English version:

1. Run severance as supplemental wages. Withhold 22% federal until an employee’s aggregate supplemental for the calendar year with your EIN passes $1,000,000; withhold 37% on the excess.
2. Apply FICA like regular wages unless a compliant SUB plan applies. Watch the 2025 Social Security cap: $174,900.
3. Report on Form 941 for the quarter paid and on the employee’s W-2. Keep backup showing how you computed supplemental aggregates, auditors ask for it.
4. If something’s off, fix with 941-X and W-2c. Remember the 3-year/2-year statute framework.

Practical tip: match the severance payroll register to the W-2 preview before year-end. A mismatched W-2/W-2c is how you end up with CP2000 letters in Q1 and annoyed ex-employees in your inbox right when you’re closing the books. I know, it’s one more checklist line, but it beats re-running year-end files during 1099 week.

I’m simplifying a bit, edge cases exist, especially with RSU vesting on termination and PTO payouts in states with special rules, but the framework above will keep you out of most potholes, especially in a year like this where HRIS teams are stretched and layoffs are, sadly, back on the table at a lot of firms.

Planning moves for employers and employees right now

Okay, tactics. Stuff that actually changes net pay, compliance risk, and cash. I’ll keep it punchy because I know half of you are reading this between RIF prep calls and Q3 close.

• Employers, want FICA relief? Build a compliant SUB plan before any severance goes out the door. The IRS position in Rev. Rul. 90-72 is still the playbook: periodic payments, tied to state unemployment eligibility, and no employee services required. One-time lump sums generally blow the exemption. The Supreme Court in United States v. Quality Stores, Inc. (2014) held that severance is FICA wages, so the default answer to the “are-severance-payments-subject-to-fica-tax” question is yes, unless you’re inside a bona fide SUB design. Trying to retrofit a lump sum after payroll runs is a losing argument and, in my experience, a fast path to 941-X paperwork and annoyed auditors.
• Employees, watch the Social Security cap timing. The OASDI cap this year is $174,900 (2025). The 6.2% employee rate applies until your year-to-date wages hit that number; after that, it stops for the year. If your severance lands after you’ve crossed the cap, your net is higher by 6.2% on those dollars. If it hits before you cross, expect that extra bite. Medicare’s 1.45% keeps going with no cap, and the Additional Medicare 0.9% kicks in on employee wages over $200,000 (threshold is unchanged from prior years). So, yes, when payments are made in the calendar year actually matters.
• Gross-ups, model it or you’ll miss. If the package is “net $X,” run the math with FICA, Medicare, and federal supplemental withholding. As of 2025, the flat supplemental federal rates are 22% up to $1,000,000 of supplemental wages and 37% above that. Stack state and local on top. I still see teams forget the 6.2% OASDI on pre-cap wages, and your gross-up will come in short by exactly that amount. Quick fix: build a simple workbook that toggles YTD wages, FICA cap utilization, and whether Additional Medicare applies.
• Documentation, write it like an auditor will read it. Spell out in the agreement: how payments are classified (regular severance vs. SUB), the schedule (periodic cadence if SUB), any offsets for unemployment, and the process for verifying eligibility. If SUB, state the administrative checks explicitly, weekly/biweekly certification, separation from service date, any disqualifiers (reemployment, refusal of suitable work, etc.).
• Audit trail, keep the SUB ties tight. Payroll auditors ask for state unemployment proof and eligibility logs. Save the determinations, weekly certifications, and payment calculations that show the link between eligibility weeks and amounts. Keep your 941 workpapers and the W-2 classification notes in the same folder. It’s boring, I know, but it’s what wins the room.

Real-world note: if your finance team is pushing for a single October payout to “clean it up,” and you want FICA relief, push back. A single lump sum is typically treated as wages for FICA after Quality Stores. A periodic SUB stream, funded and administered correctly, can change the answer. The design has to exist before the first dollar is paid.

Market context quickly, because it matters for timing: with hiring still uneven and margin targets tight in Q3 2025, more companies are spacing separations across months. That timing choice directly changes OASDI exposure for some employees and your gross-up cost. Small lever, real dollars. And yes, run the W-2 preview to the severance register, earlier this year I watched a team avoid a half-dozen W-2c’s by catching a missing Additional Medicare calc. Not glamorous, just effective.

If you ignore this, here’s what bites you later

No scare tactics, just what I’ve watched chew up budgets, Friday nights, and a few long weekends in 2025. Severance and FICA look “admin-ish” until they aren’t. A few specifics so it’s not abstract.

• Employees feel it first. When the OASDI cap math is off, net checks swing. FICA is 6.2% for Social Security up to the annual wage base and 1.45% Medicare on all wages, with an extra 0.9% Additional Medicare withheld on employee wages above $200,000. If payroll misses prior-year YTD wages after a mid-year transfer or a late bonus, the severance check can be short by thousands. Then you get W-2c cleanups and delayed refunds because the IRS won’t reconcile Additional Medicare until the corrected W-2 hits. I’ve literally seen a team spend February chasing six W-2c’s because one batch ignored Additional Medicare on a December layoff.
• Employers pay for “small” misses twice. Under United States v. Quality Stores, Inc. (2014), severance is generally wages subject to FICA unless it’s a properly structured SUB plan. If you run as wages when a valid SUB design was possible, but wasn’t in place before the first payment, you forfeit the OASDI/Medicare savings on both sides. Flip it and misclassify wages as SUB? Payroll tax assessments arrive. Add penalties for late or under-deposits (IRS tiers commonly hit at 2%, 5%, 10%, then up to 15% as days pass) and interest that compounds daily at IRS rates. And yes, alumni notice when the net doesn’t match what HR described; they talk on Slack and Glassdoor and that stuff has a tail.
• Missed opportunities are permanent. A SUB plan only shifts FICA if it’s set up and administered correctly before the first dollar goes out, periodic payments tied to state unemployment, proper funding mechanics, and documented eligibility. A one-time October “clean-up” lump sum this year? That’s typically wages for FICA after Quality Stores, no matter what you call it.
• Time windows actually close. Refunds aren’t open-ended. To fix overpaid FICA you generally need a Form 941-X within the limitation period, three years from the date the original Form 941 was filed or two years from the date the tax was paid, whichever is later. Wait too long and you just eat the cost. I’m circling back on this because it gets missed: the clock starts with each quarter. Q1 2025 errors don’t wait for your year-end close.

One more market reality check: with hiring still choppy and margins tight in Q3 2025, companies are staggering separations. That timing choice swings OASDI exposure for anyone around the cap and changes your gross-up math. Miss the preview run from W-2 to the severance register, and you’re not just reclassifying; you’re reconciling, refunding, and re-communicating. It’s the same point said a bit differently: get the setup right upfront, or you’ll pay in cash and calendar later.

Quick recap I don’t want lost: severance is generally FICA wages unless you have a compliant SUB plan in place before the first payment; penalties stack by days, interest runs daily, and 941-X relief is time-limited. None of that is theoretical, those are the mechanics that make or break your severance budget this year.

Frequently Asked Questions

Q: Should I worry about FICA on my severance if I’ve already hit the Social Security cap this year?

A: Quick tip: Social Security stops at $174,900 of wages in 2025, so no 6.2% on severance beyond that. Medicare’s 1.45% still applies, and the extra 0.9% kicks in once your total 2025 wages exceed $200,000. Don’t spend it twice; verify your YTD first.

Q: What’s the difference between regular severance and a SUB plan for taxes?

A: Regular lump‑sum severance is treated like wages: FICA applies (6.2% Social Security up to the $174,900 cap for 2025, plus 1.45% Medicare, and possibly the 0.9% Additional Medicare). A compliant SUB (Supplemental Unemployment Benefit) plan can avoid FICA if it’s paid periodically, tied to state unemployment eligibility, and typically funded via a trust. Key point: you can’t just label a check “SUB” and skip payroll tax. The plan documents, payment cadence, and coordination with unemployment insurance need to line up. In practice, SUB plans are more administrative work but can save both employee and employer FICA. If HR says “it’s SUB,” ask for the plan document, trust info, and how they’re confirming unemployment eligibility. I’ve seen too many “SUB-ish” setups get taxed anyway because the mechanics weren’t compliant.

Q: Is it better to take my severance as a lump sum or spread over months?

A: Pure tax rate? FICA usually doesn’t care about timing, if it’s regular severance, it’s wages either way. Federal withholding often defaults to 22% for supplemental wages (and 37% on supplemental amounts over $1,000,000 in the calendar year). Spreading payments can keep you under the $1M supplemental threshold and smooth cash flow. A compliant SUB structure (periodic, tied to unemployment) can avoid FICA entirely, but it’s the employer’s call and takes real admin. Practical moves: confirm whether severance counts for your 401(k) plan (some plans don’t allow post‑termination deferrals), estimate your year‑to‑date pay vs. the $174,900 Social Security cap and the $200,000 Additional Medicare trigger, and check state rules, some states have higher supplemental withholding. Cash needs matter too; I’ve advised folks who preferred a smaller net now over theoretical savings later.

Q: How do I verify my severance was taxed correctly, and fix it if payroll got it wrong?

A: Do a 15‑minute audit:

1. Pay stub/W‑2 checks: Box 3 Social Security wages should cap at $174,900 for 2025; Box 4 tax should cap near $10,843.80 (6.2% of $174,900). Box 5 Medicare wages are uncapped; Box 6 includes 1.45% plus the extra 0.9% on wages over $200,000.
2. Withholding method: Supplemental wages default to 22% federal withholding (37% on supplemental amounts over $1,000,000 in the calendar year). A single $1.2M severance? First $1M at 22%, $200k at 37%, that’s how many systems do it.
3. Examples:

• You were at $180k YTD in September and got a $50k severance in October. Correct: no more Social Security (cap hit), Medicare on the full $50k, and Additional Medicare on $30k (the portion over $200k), which is $270.
• Payroll accidentally withheld Social Security on severance after you hit the cap. Ask for a refund via payroll and a W‑2c; employer fixes with Form 941‑X. If multiple employers caused excess Social Security, claim the credit on your Form 1040.
• If it was a compliant SUB and payroll withheld FICA anyway, give HR the plan document and unemployment eligibility proof and request a correction.

4. Keep artifacts: severance agreement, pay statements, and any plan docs. If HR drags feet, I’ve been there, escalate before year‑end so the W‑2 is clean. That saves you from messy amended returns later.

@article{are-severance-payments-subject-to-fica-tax-in-2025,
    title   = {Are Severance Payments Subject to FICA Tax in 2025?},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/severance-fica-tax-rules/}
}