♦ Tax Withholdings For Pension and Taxable Annuity Distributions

Tax Withholdings For Pension and Taxable Annuity Distributions (Form 1099-R):

It’s generally not a good idea to take distributions from a taxable retirement plan – like a 401(K) – and not have an appropriate amount of federal and state income taxes withheld from your distributions.  This is no different from having taxes withheld from a paycheck or when making estimated tax payments to the IRS because a taxpayer might be self-employed.   Click on this link for additional literature from the IRS on pension distributions: https://www.irs.gov/forms-pubs/about-form-w4p

Don’t be the one who thinks they’re smart and liquidate $ 150,000 in retirement money in one year and forget to have tax withholdings on those distributions.  A mistake like this may end up costing a taxpayer approximately  $ 30,000 in income taxes at tax filing time.

Federal and state tax withholdings for such distributions should be roughly 20% of total distributions.  To make a federal tax withholding election, fill out a W4p prior to taking the distribution  https://www.irs.gov/pub/irs-pdf/fw4p.pdf

As always, consult with a tax professional for clear guidance on what tax amounts to withhold.. A CPA will be able to project your anticipated tax liability for the tax year in question, and be able to provide sound guidance as to an appropriate strategy regarding taxable distributions.

One comment on “♦ Tax Withholdings For Pension and Taxable Annuity Distributions

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