Compliance May 14, 2009

IRS Distributes Pension Withholding Procedures

May 14, 2009 (PLANSPONSOR.com) - The Internal Revenue Service (IRS) has put out new withholding adjustment procedures for pension plans - to make sure those receiving pensions are having the proper amount withheld.
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An IRS news release said the new procedureswill help some pensioners avoid a smaller refund next spring or a balance due in limited situations.

The tax agency said pension payors are not required to use this new procedure, and may continue to use only the withholding tables released by the IRS in February (see  New Withholding Tables Apply to Pension Distributions ). For plans that adopt the new procedure, withholding on pension payments will be automatically adjusted with no action needed by pensioners, the IRS said.

According to the news release, the IRS is also encouraging pension payors who implement the new procedures to contact retirees who previously submitted a Form W-4P, Withholding Certificate for Pension or Annuity Payments, and ask for additional withholding after the February withholding tables were issued.

Special Attention

Those who should pay particular attention to their withholding include:

  • married couples with two incomes,
  • individuals with multiple jobs,
  • dependents,
  • some Social Security recipients who work and
  • workers who do not have valid Social Security Numbers.

The optional adjustment procedure which may be used by those paying pensions is available in  Notice 1036-P , Additional Withholding for Pensions for 2009. 

The on-line version of Publication 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables, will be updated and available next week, the agency said.

In February, the IRS issued revised withholding tables incorporating the Making Work Pay Tax Credit, one of the key provisions of the American Recovery and Reinvestment Act (see  New Withholding Tables Apply to Pension Distributions ).

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