Why does my California paycheck stub show two different supplemental withholding rates?

Because EDD DE 231PS publishes two flat California supplemental rates: 10.23% on bonuses and stock-option payments and 6.6% on all other supplemental wages including severance. If your final paycheck bundles severance with a bonus or RSU income, the employer applies both rates separately on the California side — that is correct per DE 231PS and not a payroll error. The federal side does not split the same way; the full $70,000 is withheld at the single 22% supplemental rate per IRS Pub 15 § 7.

Is 6.6% on severance and 10.23% on the bonus the actual tax I owe?

No — those rates are paycheck-mechanics defaults that produce a deposit against your final California tax. Your actual California liability is computed on Form 540 using graduated brackets and reconciled at filing. For a senior IC in the 9.3% California marginal bracket, the 6.6% severance withholding under-withholds by roughly 2.7 percentage points; the 10.23% bonus rate slightly over-withholds. Federal supplemental (22%) under-withholds by about 10 points if your federal marginal rate is 32%. Plan on a balance due at filing unless you have adjusted other-paycheck withholding mid-year.

Does CA SDI come out of my severance and bonus?

Yes. SB 951 eliminated the SDI taxable-wage cap effective January 1, 2024, so SDI applies to all wages — including supplemental — with no upper limit. The 2026 SDI employee contribution rate is 1.3% per EDD Contribution Rates. A $70,000 severance + bonus pays $910 in SDI regardless of your YTD wages.

I was laid off mid-year and already crossed the Social Security wage base. Does OASDI still apply to my severance?

No, not on the portion above the cap. OASDI (6.2% employee) stops once cumulative Social Security wages with the employer reach the 2026 base of $184,500 announced by SSA. If you crossed the base on a regular paycheck before the severance hits, the severance + bonus paycheck shows zero OASDI withholding. Medicare (1.45%) continues regardless because Medicare has no wage base, and the additional 0.9% Medicare surtax kicks in once cumulative Medicare wages cross $200,000 single or $250,000 MFJ.

What happens if my cumulative supplemental wages for the year exceed $1 million?

The federal supplemental rate jumps from 22% to a mandatory 37% on the portion above $1 million cumulative per IRS Pub 15 § 7. This is the top federal individual rate; it is not optional and not adjustable on Form W-4. The threshold is tracked by the employer paying the supplemental wages, so if you have supplemental wages from two unrelated employers totaling more than $1M but neither employer individually crosses the threshold, the gap is reconciled on Form 1040 at filing — usually with a substantial balance due. California does not have an equivalent step-up; the 6.6% / 10.23% split applies regardless of cumulative amount.

Can I ask my employer to withhold extra to cover the under-withholding gap?

Yes — but only on regular wages, not on a separately identified supplemental payment. The flat supplemental rate is the default for a supplemental check; you cannot override the 6.6% / 10.23% / 22% defaults on the severance check itself in most payroll systems. You can, however, file an adjusted Form W-4 (federal) and Form DE 4 (California) to request additional withholding on remaining regular paychecks or on the next-bonus check. If no regular paychecks remain, the practical option is to make a Form 1040-ES estimated-tax payment before the next quarterly deadline.

My severance was paid after I moved out of California — do these rules still apply?

Generally yes for the California-source portion. FTB Pub 1031 explains the rule: California taxes wages earned for services performed in California regardless of the employee's residency at payment time. Severance attributable to California-based service is California-source income even if you have relocated. Your employer's payroll system may continue to apply 6.6% / 10.23% California supplemental withholding and 1.3% CA SDI; residency allocation is usually settled at filing time on Form 540NR rather than at the paycheck step. Federal withholding does not change with state of residence — the 22% supplemental rate is uniform.

Does the aggregate withholding method help here?

It can — particularly if your full-year income is meaningfully different from a 22% / 6.6% / 10.23% blend. When supplemental wages are paid with regular wages on the same check, EDD DE 231PS allows the employer to compute Personal Income Tax on the combined total using the regular withholding tables (the "aggregate method") rather than the flat supplemental rate. Whether your employer offers the aggregate method depends on payroll-system capabilities; many large employers default to the flat method for administrative simplicity. Ask payroll which method they apply if your situation is unusual — for most layoff recipients the flat method is what shows up on the stub.

California Severance + Bonus Supplemental Withholding — $50k + $20k Worked Example (2026)

By Vitality Press Editorial

Updated May 17, 2026

Independent editorial team. Every numeric claim cites a primary source — IRS / agency publication, federal or state statute, or controlling case law.

Who this applies to

This scenario applies to a California employee — most commonly a senior individual contributor, manager, or director on a layoff package — who receives both a severance component and a separately classified bonus or retention payment at termination. The bonus may be an accrued performance bonus from the prior fiscal year that vests on termination, a retention bonus paid as part of the separation package, or the cash-out of an annual bonus pro-rated through the last day of employment. Whatever the source, the bonus is structurally different from the severance for California withholding purposes: it falls into the 10.23% supplemental tier rather than the 6.6% tier, and that distinction is visible as two separate line items on the paycheck stub. The situation is more common than people realize. Most large California employers run their year-end bonus cycle in February or March, so a layoff in April through November is likely to include either a pro-rated bonus accrual or a flat retention payment in the separation paperwork. RSU vesting income that processes through payroll on the termination date sits in the same 10.23% category. The result: a California layoff paycheck that bundles regular final wages, accrued PTO payout, severance, and a bonus stacks four different CA withholding contexts on a single check. The assumed profile for this walk-through is a senior IC earning $200,000 in base salary with $50,000 in variable comp, laid off mid-year without cause. The $50,000 severance equals roughly 13 weeks at the base salary level, and the $20,000 bonus represents the pro-rated portion of a $40,000 annual target bonus through the layoff date. Both payments hit the same final paycheck. The walk-through shows the exact dollar amounts withheld at each layer, then explains why the flat rates under-withhold for an employee at this income level — and what to do about it before tax season arrives.

What changes for you

The withholding math layers as follows. On the federal side, IRS Publication 15 § 7 imposes a flat 22% on supplemental wages up to $1 million cumulative for the calendar year, regardless of whether the supplemental payment is severance, bonus, RSU income, commission, or any other category. The full $70,000 combined payment is therefore withheld at 22% federally, producing $15,400 of federal income-tax withholding. Federal does not split the bonus from the severance. California does split. EDD DE 231PS is explicit: "For stock options and bonuses that were paid on or after November 1, 2009, the flat rate is 10.23 percent. For other types of supplemental wage payments made on or after November 1, 2009, the flat rate is 6.6 percent." The $50,000 severance is withheld at 6.6%, producing $3,300. The $20,000 bonus is withheld at 10.23%, producing $2,046. California-side income-tax withholding therefore totals $5,346 — and the paycheck stub will show two separate California supplemental lines, which is not a payroll error. FICA continues to apply. OASDI at 6.2% on the employee side runs up to the 2026 Social Security wage base of $184,500 announced by the Social Security Administration. A senior IC at $200,000 base who is laid off mid-year (say, June) will probably have crossed the wage base on a regular paycheck just before the severance is paid, in which case OASDI withholding on the $70,000 severance + bonus is either zero or applies to a thin slice. If the OASDI cap has not been crossed, the full 6.2% applies — $4,340 on $70,000. Medicare at 1.45% applies to the full $70,000 with no cap, producing $1,015. The additional 0.9% Medicare surtax under 26 U.S.C. § 3101(b)(2) kicks in once cumulative Medicare wages cross $200,000 single or $250,000 MFJ; an employer begins withholding it once the individual employee's YTD Medicare wages with that employer cross $200,000. CA SDI is the California-specific always-on layer. SB 951, effective January 1, 2024, eliminated the taxable-wage cap entirely. The 2026 SDI employee contribution rate is 1.3% per the EDD Contribution Rates page. A $70,000 severance + bonus paid in 2026 sees $910 of SDI regardless of YTD wages — there is no ceiling. Assuming the OASDI wage base has not yet been crossed and the additional Medicare surtax does not apply, the full withholding stack on a $70,000 payment is: $15,400 federal supplemental + $5,346 California supplemental + $4,340 OASDI + $1,015 Medicare + $910 CA SDI = $27,011. The employee's net check before any other deductions is therefore approximately $42,989. If the OASDI base has been crossed, the net is roughly $4,340 higher. The reconciliation point is where most California layoff recipients get caught. For a senior IC whose full-year income places them in the 32% federal marginal bracket and the 9.3% California bracket, the 22% federal flat rate under-withholds by roughly 10 percentage points on the supplemental income, and the 6.6% California rate under-withholds by roughly 2.7 percentage points on the severance component (the 10.23% bonus rate is actually higher than 9.3%, so the bonus over-withholds slightly on the California side). The federal under-withholding is the larger gap by far. On the combined $70,000, expect a federal shortfall in the $5,000-$7,000 range at filing, partially offset by full-year deductions and any other withholding adjustments. The exact number depends on filing status, other income for the year, the standard or itemized deduction, and credits — none of which the flat supplemental rate accounts for.

Decision tree

If Your cumulative supplemental wages from this employer for the calendar year (including this severance + bonus) will exceed $1,000,000
Then → The federal supplemental rate on the portion above $1M jumps from 22% to a mandatory 37% per IRS Pub 15 § 7. Coordinate with a tax advisor on estimated-tax payments — this is a withholding timing shift, not a new liability, but the cash-flow impact is material.
Else: Standard 22% federal flat supplemental applies to the full payment.
If Your severance and bonus are paid on the same check vs. as separate payments
Then → Both flat-rate (supplemental) and aggregate methods are available to the employer when supplemental wages are paid with regular wages — DE 231PS instructs employers to compute PIT on the combined total in that case. Separate checks force the flat supplemental method (6.6% on severance, 10.23% on bonus) on the California side.
Else: If the bonus is paid in a separate prior check, the bonus has already been withheld at 10.23% CA / 22% federal, and the severance check on its own is withheld at 6.6% CA / 22% federal.
If You have already crossed the 2026 Social Security wage base of $184,500 in YTD wages with this employer
Then → OASDI (6.2%) stops applying once cumulative Social Security wages reach the wage base, so only the 1.45% Medicare component (plus the 0.9% surtax if cumulative Medicare wages cross $200,000 single / $250,000 MFJ) remains on the FICA side.
Else: OASDI applies at 6.2% up to the $184,500 ceiling. A senior IC at $200,000 base laid off mid-year may straddle the wage base — the severance + bonus paycheck will see partial OASDI withholding only on the slice below the cap.
If You have adjusted Form W-4 (federal) or Form DE 4 (California) mid-year to compensate for the supplemental-rate gap
Then → Factor the additional voluntary withholding into your total picture. The flat supplemental rate is not a ceiling on what you can withhold on other paychecks — DE 4 / W-4 changes apply to regular wages and can absorb the under-withholding.
Else: If your marginal bracket is 32% federal / 9.3% CA and you have not adjusted withholding, set aside roughly 10% of the gross severance + bonus as a balance-due cushion. The exact gap depends on full-year wages, deductions, and filing status — model it on Form 1040 / Form 540 before tax season.

Action steps

Review your final pay stub line by line on the day it is issued — confirm the severance line is withheld at 6.6% California and the bonus line at 10.23% California, with both rolling up to 22% federal supplemental. Two separate California lines is correct per EDD DE 231PS, not a payroll error.
If you have any paychecks remaining before your effective termination date (regular wages, PTO trailing, etc.), file an adjusted Form W-4 with your payroll team to request additional federal withholding, and an adjusted Form DE 4 if you want to adjust the California side. The flat supplemental rate is the default for a separately identified supplemental payment; it does not prevent additional voluntary withholding on regular paychecks.
Project your total federal and California tax liability for the year on a Form 1040 / Form 540 worksheet using your YTD wages, the severance + bonus, and your expected non-wage income through year-end. Compare the projected total tax to total YTD withholding plus the supplemental withholding on the severance check — the gap is your expected balance due.
Set aside the projected balance due in a separate savings or money-market account before spending the severance. For a senior IC at the 32% federal / 9.3% California marginal bracket, plan on roughly 10% of the gross severance + bonus as a federal balance-due cushion; the California side is usually close to neutral but can be modeled separately.
File for unemployment insurance with the EDD as soon as your last day of work passes — California UI is not offset by severance pay under Cal. Unemp. Ins. Code § 1265 (severance is not "wages" for UI eligibility purposes). The 1-week unpaid waiting period starts when you file, not when severance ends.
If your cumulative supplemental wages for the year (across all severance + bonus + RSU vesting from this employer) will exceed $1,000,000, work with a tax advisor on the 37% federal tier and on estimated-tax payments through Form 1040-ES — the under-withholding penalty under 26 U.S.C. § 6654 is meaningful at that income level.
Consult a CPA or tax attorney before signing the separation agreement if the package contains equity acceleration, deferred compensation, or any payment contingent on a change in control — the layered withholding analysis interacts with IRC § 280G and § 409A in ways that the flat supplemental rate cannot capture.

FAQ

Why does my California paycheck stub show two different supplemental withholding rates?: Because EDD DE 231PS publishes two flat California supplemental rates: 10.23% on bonuses and stock-option payments and 6.6% on all other supplemental wages including severance. If your final paycheck bundles severance with a bonus or RSU income, the employer applies both rates separately on the California side — that is correct per DE 231PS and not a payroll error. The federal side does not split the same way; the full $70,000 is withheld at the single 22% supplemental rate per IRS Pub 15 § 7.
Is 6.6% on severance and 10.23% on the bonus the actual tax I owe?: No — those rates are paycheck-mechanics defaults that produce a deposit against your final California tax. Your actual California liability is computed on Form 540 using graduated brackets and reconciled at filing. For a senior IC in the 9.3% California marginal bracket, the 6.6% severance withholding under-withholds by roughly 2.7 percentage points; the 10.23% bonus rate slightly over-withholds. Federal supplemental (22%) under-withholds by about 10 points if your federal marginal rate is 32%. Plan on a balance due at filing unless you have adjusted other-paycheck withholding mid-year.
Does CA SDI come out of my severance and bonus?: Yes. SB 951 eliminated the SDI taxable-wage cap effective January 1, 2024, so SDI applies to all wages — including supplemental — with no upper limit. The 2026 SDI employee contribution rate is 1.3% per EDD Contribution Rates. A $70,000 severance + bonus pays $910 in SDI regardless of your YTD wages.
I was laid off mid-year and already crossed the Social Security wage base. Does OASDI still apply to my severance?: No, not on the portion above the cap. OASDI (6.2% employee) stops once cumulative Social Security wages with the employer reach the 2026 base of $184,500 announced by SSA. If you crossed the base on a regular paycheck before the severance hits, the severance + bonus paycheck shows zero OASDI withholding. Medicare (1.45%) continues regardless because Medicare has no wage base, and the additional 0.9% Medicare surtax kicks in once cumulative Medicare wages cross $200,000 single or $250,000 MFJ.
What happens if my cumulative supplemental wages for the year exceed $1 million?: The federal supplemental rate jumps from 22% to a mandatory 37% on the portion above $1 million cumulative per IRS Pub 15 § 7. This is the top federal individual rate; it is not optional and not adjustable on Form W-4. The threshold is tracked by the employer paying the supplemental wages, so if you have supplemental wages from two unrelated employers totaling more than $1M but neither employer individually crosses the threshold, the gap is reconciled on Form 1040 at filing — usually with a substantial balance due. California does not have an equivalent step-up; the 6.6% / 10.23% split applies regardless of cumulative amount.
Can I ask my employer to withhold extra to cover the under-withholding gap?: Yes — but only on regular wages, not on a separately identified supplemental payment. The flat supplemental rate is the default for a supplemental check; you cannot override the 6.6% / 10.23% / 22% defaults on the severance check itself in most payroll systems. You can, however, file an adjusted Form W-4 (federal) and Form DE 4 (California) to request additional withholding on remaining regular paychecks or on the next-bonus check. If no regular paychecks remain, the practical option is to make a Form 1040-ES estimated-tax payment before the next quarterly deadline.
My severance was paid after I moved out of California — do these rules still apply?: Generally yes for the California-source portion. FTB Pub 1031 explains the rule: California taxes wages earned for services performed in California regardless of the employee's residency at payment time. Severance attributable to California-based service is California-source income even if you have relocated. Your employer's payroll system may continue to apply 6.6% / 10.23% California supplemental withholding and 1.3% CA SDI; residency allocation is usually settled at filing time on Form 540NR rather than at the paycheck step. Federal withholding does not change with state of residence — the 22% supplemental rate is uniform.
Does the aggregate withholding method help here?: It can — particularly if your full-year income is meaningfully different from a 22% / 6.6% / 10.23% blend. When supplemental wages are paid with regular wages on the same check, EDD DE 231PS allows the employer to compute Personal Income Tax on the combined total using the regular withholding tables (the "aggregate method") rather than the flat supplemental rate. Whether your employer offers the aggregate method depends on payroll-system capabilities; many large employers default to the flat method for administrative simplicity. Ask payroll which method they apply if your situation is unusual — for most layoff recipients the flat method is what shows up on the stub.