The company I work for is closing next week. I will be getting my PTO paid to me and severance. I along with my co workers were told if we change our tax withholding to exempt we won't have to pay supplemental taxes of 25%. Is this true or can I get in trouble with the IRS. I did owe taxes last year. But this exempt status would only be for these checks not the whole year. If I can get in trouble can I claim 10 to pay less than the 25%. I am from California (just in case that info is needed to answer the question).