Starting December 15, 2022, if you need to change your withholding on your pension you will be required to fill out an IRS W-4P. This form is used to determine your tax withholdings for payments from your pension or long-term periodic payments from your investment accounts.
For more accurate federal income tax withholding, the IRS made the decision to split the existing W-4P form into two forms:
- Form W-4P for periodic payments.
- Form W-4R for non-periodic payments/eligible rollover distributions.
What are W-4 forms?
When you retire, you receive monthly income from your pension account or withdrawals from an investment account (DCP or Plan 3). That income is taxed. DRS is required to withhold a certain amount of federal taxes. The IRS W-4 forms are used to determine how much is withheld from your retirement income.
Which form do you need?
For retirees:
You only need to submit a new IRS W-4P form if you would like to change your tax withholding.
For those applying for retirement:
Submit the 2022 IRS W-4P form with your application. The form will tell DRS how much to withhold from your monthly pension income.
For DCP or Plan 3 withdrawals:
Withdrawals from a Plan 3 or DCP account are taxed at a standard federal withholding rate (20% for most withdrawal types). You also have the option to increase your withholding by submitting an IRS W-4R with your withdrawal request.
Source: https://www.drs.wa.gov/new-w4-forms-newsfeed/
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