- 6 -
Withholding From Pensions and Annuities
Generally, Federal income tax withholding applies to the
taxable part of payments made from pension, profit-sharing,
stock bonus, annuity, and certain deferred compensation
plans; from individual retirement arrangements (IRAs); and
from commercial annuities. The method and rate of withhold-
ing depends on the kind of payment you receive. Also,
because your tax situation may change from year to year, you
may want to refigure your withholding each year. You can
change the amount to be withheld by using lines 2 and 3 of
Form W-4P.
Choosing not to have income-tax withheld. You * * * can
also choose not to have income tax withheld from your pay-
ments by using line 1 of Form W-4P. * * *
* * * * * * *
Caution: There are penalties for not paying enough tax
during the year, either through withholding or estimated tax
payments.
* * * * * * *
Nonperiodic payments–10% withholding. Your payer must
withhold a flat 10% from nonperiodic payments (but see
Eligible rollover distribution–20% withholding below) unless
you choose not to have income tax withheld. Distributions
from an IRA that are payable on demand are treated as
nonperiodic payments. You can choose not to have income tax
withheld from a nonperiodic payment by submitting Form W-4P
(containing your correct TIN) to your payer and checking the
box on line 1.
* * * * * * *
Eligible rollover distribution–20% withholding.
Distributions you receive from qualified pension or annuity
plans (e.g., 401(k) pension plans) or tax-sheltered annu-
ities that are eligible to be rolled over tax free to an IRA
or qualified plan are subject to a flat 20% withholding.
The 20% withholding is required and you cannot choose not to
have income tax withheld for eligible rollover distribu-
tions. See Pub. 505 for more details. However, the payer
will not withhold income tax if the entire distribution is
transferred by the plan administrator in a direct rollover
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011