Withholding on Distributions from Pensions, Annuities and IRAs

By Tom Ochsenschlager, J.D., CPA

The IRS will now permit electronic and telephonic submissions of Forms W-4P (for distributions from pensions and annuities) and W-4R (for distributions from retirement plans and IRAs) where a taxpayer requests withholding from the distributions that differs from the “default” withholding. Specific guidance to apply for electronic filing of these two forms is available at IRS Publication 15-A (2022), Employer's Supplemental Tax Guide and Publication 15-T (2022), Federal Income Tax Withholding Methods.

The “default” withholding rate is 10% for periodic distributions and 20% for “rollover” distributions. In both instances, a higher percentage can be elected. 

Telephonic submissions of W-4P are permitted. The IRS will issue further guidance on how this will be applied but, pending the submission of the guidance, taxpayers should use a “script” that incorporates the first page of the paper Form W-4P but should skip the paper’s “step 2” and “step 3.”

Additional Guidance for Substitute and Telephonic Submissions of Forms W-4P and W-4R | Internal Revenue Service (irs.gov)