Taxmap/pubs/p505-005.htm#TXMP49d222f6
Pensions and Annuities

Taxmap/pubs/p505-005.htm#TXMP6e6d71b2
Note. Use Form W-4, not Form W-4P, if you receive any of the following.

• Military retirement pay.
• Payments from a nonqualified deferred compensation plan. This is an employer plan that pays part of your compensation at a later time, but is not a tax-qualified plan. See Nonqualified Deferred Compensation and Section 457 Plans in Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration.
• Payments from a state or local deferred compensation plan.

Taxmap/pubs/p505-005.htm#TXMP2ede712e Withholding rules.

The withholding rules for pensions and annuities differ from those for salaries and wages in the following ways.

• If you do not fill out a withholding certificate, tax will be withheld as if you were married and claiming three withholding allowances. This means that tax will be withheld only if your pension or annuity is at least $1,480 a month (or $17,760 a year).
• You can choose not to have tax withheld, regardless of how much tax you owed last year or expect to owe this year. You do not have to qualify for exemption. See Choosing Not To Have Income Tax Withheld, later.
• If you do not give the payer your social security number (in the required manner) or the IRS notifies the payer before any payment or distribution is made that you gave it an incorrect social security number, tax will be withheld as if you were single and were claiming no withholding allowances. This means that tax will be withheld if your pension or annuity is at least $230 a month (or $2,760 a year).

Taxmap/pubs/p505-005.htm#TXMP14ac92d3 Effective date of withholding certificate.

If you give your withholding certificate (Form W-4P or a similar form) to the payer by the time your payments start, it will be put into effect by the first payment made more than 30 days after you submit the certificate.

If you give the payer your certificate after your payments start, it will be put into effect with the first payment which is at least 30 days after you submit it. However, the payer can elect to put it into effect earlier.

Taxmap/pubs/p505-005.htm#TXMP7f03ae19 Nonperiodic Payments

Nonperiodic Payments

Tax will be withheld at a flat rate on any nonperiodic payments you receive.

Because withholding on nonperiodic payments does not depend on withholding allowances or whether you are married or single, you cannot use Form W-4P to tell the payer how much to withhold. But you can use Form W-4P to specify that an additional amount be withheld. You can also use Form W-4P to choose not to have tax withheld or to revoke a choice not to have tax withheld.

You may need to use Form W-4P to ask for additional withholding. If you do not have enough tax withheld, you may need to pay estimated tax, as explained in chapter 2.

Taxmap/pubs/p505-005.htm#TXMP66cc5a1d Eligible Rollover Distributions

Eligible rollover distribution.

A distribution you receive that is eligible to be rolled over tax free into a qualified retirement or annuity plan is called an eligible rollover distribution (ERD). This is the taxable part of any distribution from a qualified pension plan or tax-sheltered annuity that is not any of the following.

1. A minimum required distribution.
2. One of a series of substantially equal periodic pension or annuity payments made over:
   1. Your life (or your life expectancy) or the joint lives of you and your beneficiary (or your life expectancies), or
   2. A specified period of 10 or more years.
3. A hardship distribution.

The payer of a distribution must withhold at a flat rate on any part of an ERD that is not rolled over directly to another qualified plan. You cannot elect not to have withholding on these distributions. No withholding is required on any part paid directly to another plan.

Taxmap/pubs/p505-005.htm#TXMP434c95af Choosing Not To Have   Income Tax Withheld

Choosing Not To Have Income Tax Withheld

You can choose not to have income tax withheld from your pension or annuity. This rule does not apply to eligible rollover distributions. The payer will tell you how to make this choice. If you use Form W-4P, check the box on line 1 to make this choice. This choice will remain in effect until you decide you want withholding.

The payer must withhold if either of the following applies:

• You do not give the payer your social security number (in the required manner), or
• The IRS notifies the payer, before any payment or distribution is made, that you gave it an incorrect social security number.

If you do not have any income tax withheld from your pension or annuity, or if you do not have enough withheld, you may have to pay estimated tax. See chapter 2.

If you do not pay enough tax either through estimated tax or withholding, you may have to pay a penalty. See chapter 4 for information about this penalty.

Taxmap/pubs/p505-005.htm#TXMP21d1df46 Outside the United States.

You generally must have tax withheld from pension or annuity benefits delivered outside of the United States. However, if you are a U.S. citizen or resident alien, you can choose not to have tax withheld if you give the payer of the benefits a home address in the United States or in a U.S. possession. The payer must withhold tax if you provide a U.S. address for a nominee, trustee, or agent to whom the benefits are to be delivered, but do not provide your own home address in the United States or in a U.S. possession.

Taxmap/pubs/p505-005.htm#TXMP6ec1d50b Notice required of payer.

The payer of your pension or annuity must send you a notice telling you about your right to choose not to have tax withheld.

Generally, the payer will not send a notice to you if it is reasonable to believe that the entire amount you will be paid is not taxable.

Taxmap/pubs/p505-005.htm#TXMP35828f17 Revoking a choice not to have tax withheld.

The payer of your pension or annuity will tell you how to revoke your choice not to have income tax withheld from periodic or nonperiodic payments. If you use Form W-4P to revoke the choice, print "Revoked" by the checkbox on line 1 of the form.

If you use Form W-4P to revoke the choice for periodic payments and you do not complete line 2 of the form, the payer will withhold as if you were married and claiming three allowances.

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