IRS Form W-4R

Last year, the IRS announced that IRS Form W-4P, Withholding Certificate for Pension or Annuity Payments, will be split into two forms: IRS Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, and IRS Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions. The IRS has stated that payors are to use the new forms starting no later than January 1, 2023.

Currently, IRS Form W-4P is used by IRA sponsors to provide the IRS required information about federal income tax withholding for IRA distributions. Typically, a substitute Form W-4P is included on the back of IRA distribution forms. Going forward, Form W-4P will only be used for federal income tax withholding for periodic payments from IRAs. The only IRA distributions that are considered periodic distributions are annuitized distributions from an IRA annuity. The new Form W-4R will be used for nonperiodic IRA distributions (usually subject to a flat withholding rate of 10% unless another rate is elected or withholding is waived by the IRA holder).

The IRS has released requirements in Publication 15-A, Employer's Supplemental Tax Guide, for use in 2022, for electronic systems set up as a substitute to paper Forms W-4R. However, as of the date of this publication, the IRS has not yet released guidelines for a substitute to Form W-4R for use with paper IRA distribution forms. PMC will be updating all IRA distribution forms at the appropriate time.