IRS provides guidance on Form W-4P reporting

TTax Hot Topics newsletterhe IRS released Notice 2020-3 to provide guidance on withholding from periodic payments for pensions, annuities, and other deferred income for the 2020 calendar year.

Under current law, withholding for periodic payments under Section 3405(a) is generally determined by the number of allowances reported on Form W-4P, which is designed to closely parallel the information reported on Form W-4 used for withholding from wages. However, the Tax Cuts and Jobs Act (TCJA) made significant reporting changes to Form W-4 for the 2020 calendar year, therefore, information requested on the 2020 Form W-4 no longer parallels information requested on Form W-4P.

Consequently, for purposes of withholding from periodic payments, the IRS plans to provide in the 2020 Publication 15-A, Employer’s Supplemental Tax Guide, that the 2020 Form W-4P will work with certain withholding tables and computational procedures in the 2020 Publication 15-T, Federal Income Tax Withholding Methods, that are applicable to a 2019 or earlier Form W-4. Thus, information requested on the 2020 Form W-4P will generally continue to parallel Form W-4 prior to 2020. Notice 2020-3 provides that individuals may use either the worksheets to Form W-4P or the Tax Withholding Estimator to determine their entries on the 2020 Form W-4P.

Jeff Martin
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

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