Annuity Payment Tax Withholding Form Changes

IRS annuity payment tax withholding Form W-4P has been split into two forms. The forms are optional for 2022 and are required for 2023:

For clients with a current withholding election, it continues as is. For clients wanting to change withholding elections and for new business, the forms will inform Lafayette Life how much to withhold.

Form W-4P will apply only to withhold federal income tax from periodic payments that are irrevocable and paid at required intervals over one year (annuitizations, SPIAs, DIAs, inherited IRAs & NQ stretch). If not used, default withholding will be the single rate with no adjustment.

Form W-4R will apply to withholding on non-periodic payments that are discretionary and not required at regular intervals over one year (IRA RMDs, ordinary withdrawals including systematic, GLWB withdrawals) and eligible rollover distributions (indirect 60-day rollovers). If not used, a 10% default rate applies.

For more info, have clients refer to the W-4P & W-4R general instructions to help determine withholding options, or contact a tax advisor.

IRS website: https://www.irs.gov/