so, provide the payer Form W-4P, Withholding Certificate for
Pension or Annuity Payments, or a similar form provided by the payer.
Withholding from periodic payments of a pension or annuity is generally
figured the same way as for salaries and wages. If you do not submit the
withholding certificate, the payer must withhold tax as if you were married
and claiming three withholding allowances. If you do not provide the payer
with your correct social security number, tax will be withheld as if you
were single and claiming no withholding allowances, even if you submitted
a Form W-4P and elected a lower amount.
If you pay your taxes through withholdings and not
enough is withheld, you may also need to make estimated tax payments to
ensure your taxes are not underpaid.
Special rules apply to certain non-periodic
payments from qualified retirement plans. If an eligible rollover
distribution is paid to you, the payer must withhold 20% of it, even if you
intend to roll it over later, unless you choose the direct rollover option.
A distribution sent to you in the form of a check payable to the receiving
plan or IRA is not subject to withholding.
The pension or annuity payments that you receive
are fully taxable if you have no investment in the contract
because you did not contribute anything or are not considered to
have contributed anything for the pension or annuity. Since your employer
did not withhold contributions from your salary and you received all of your
contributions tax free in prior years is another reason the payments are
fully taxable.
Furthermore, if you receive pension or annuity payments before
age 59 1/2, you may be subject to an additional 10% on early
distributions unless the distribution was made as part of a
series of substantially equal periodic payments from a qualified plan that
begins after your separation from service. They could also be subject to the
additional 10% on early distributions unless the distribution was made
because you were totally and permanently disabled or made on or
after the death of the plan participant or contract holder. The
distribution would also not be subject to the penalty if made from a
qualified retirement plan after your separation from service and made in or
after the year you reached age 55.
If you receive retirement benefits in the form of
pension or annuity payments from a qualified employer retirement
plan, all or some portion of the amounts you receive may be
taxable. Additionally, if you contributed after-tax dollars to
your pension or annuity, your pension payments are partially taxable.
Furthermore, if you receive pension or annuity payments before age 59½, you
may be subject to an additional 10% tax on early distributions unless the
distribution qualifies for an exception. All in all, the taxable portion of
your pension or annuity payment is generally subject to federal income tax
withholding.
Withholding from periodic payments of a pension
or annuity is generally figured the same way as for salaries and
wages. If you do not submit the withholding certificate, the
payer must withhold tax as if you were married and claiming
three withholding allowances. In regards to pension and annuities
distribution, if you pay your taxes through withholdings and
not enough is withheld, you may also need to make estimated tax
payments to ensure your taxes are not underpaid.
If some contributions to your pensions and
annuity plan were previously included in income, part of the
distributions from the arrangement will be excluded from income and you must
figure the tax-free portion at the start of payments. The tax-free part of the contributions to your
pension or annuity plan
