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previous page Previous Page: Publication 505 - Tax Withholding and Estimated Tax - Sick Pay
next page Next Page: Publication 505 - Tax Withholding and Estimated Tax - Gambling Winnings
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taxmap/pubs/p505-005.htm#en_us_publink10007284

Pensions and Annuities(p16)


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Income tax usually will be withheld from your pension or annuity distributions unless you choose not to have it withheld. This rule applies to distributions from:
The amount withheld depends on whether you receive payments spread out over more than 1 year (periodic payments), within 1 year (nonperiodic payments), or as an eligible rollover distribution (ERD). You cannot choose not to have income tax withheld from an ERD. ERDs are discussed on this page under Eligible Rollover Distributions.
taxmap/pubs/p505-005.htm#en_us_publink10007285

Nontaxable part.(p16)


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The part of your pension or annuity that is a return of your investment in your retirement plan (the amount you paid into the plan or its cost to you) is not taxable. Income tax will not be withheld from the part of your pension or annuity that is not taxable. The tax withheld will be figured on, and cannot be more than, the taxable part.
For information about figuring the part of your pension or annuity that is not taxable, see Publication 575.
taxmap/pubs/p505-005.htm#en_us_publink10007286

Periodic Payments(p16)


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Withholding from periodic payments of a pension or annuity is figured in the same way as withholding from salaries and wages. To tell the payer of your pension or annuity how much you want withheld, fill out Form W-4P or a similar form provided by the payer. Follow the rules discussed under Salaries and Wages, starting on page 4, to fill out your Form W-4P.
Note.Use Form W-4, not Form W-4P, if you receive any of the following.
taxmap/pubs/p505-005.htm#en_us_publink10007288

Withholding rules.(p16)


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The withholding rules for pensions and annuities differ from those for salaries and wages in the following ways.
taxmap/pubs/p505-005.htm#en_us_publink10007289

Effective date of withholding certificate.(p16)


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If you give your withholding certificate (Form W-4P or a similar form) to the payer on or before the date 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#en_us_publink10007290

Nonperiodic Payments(p16)


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Nonperiodic Payments

Tax will be withheld at a flat 10% rate on any nonperiodic payments you receive, unless you tell the payer not to withhold.
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 also can use Form W-4P to choose not to have tax withheld or to revoke a choice not to have tax withheld.
EIC
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#en_us_publink10007292

Eligible Rollover Distributions(p16)


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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 required minimum 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 20% rate on any part of an ERD that is distributed rather than rolled over directly to another qualified plan. You cannot elect not to have withholding on these distributions. No withholding is required on any part rolled over directly to another plan.
taxmap/pubs/p505-005.htm#en_us_publink10007293

Choosing Not To Have 
Income Tax Withheld(p16)


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Choosing Not To Have Income Tax Withheld

For payments other than ERDs, you can choose not to have income tax withheld. 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:
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, or a combination of both, you may have to pay a penalty. See chapter 4.
taxmap/pubs/p505-005.htm#en_us_publink10007294

Payments delivered outside the United States.(p16)


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You generally must have tax withheld from pension or annuity benefits delivered outside 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#en_us_publink10007295

Notice required of payer.(p16)


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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#en_us_publink10007296

Revoking a choice not to have tax withheld.(p16)


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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, enter "Revoked" by the checkbox on line 1 of the form. This will instruct the payer to withhold as if you were married and claiming three allowances. However, you can tell the payer exactly how much to withhold by completing line 2 of the form.
previous pagePrevious Page: Publication 505 - Tax Withholding and Estimated Tax - Sick Pay
next pageNext Page: Publication 505 - Tax Withholding and Estimated Tax - Gambling Winnings
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication