Proposed regs on periodic payment withholding out

Tax Hot Topics newsletterThe IRS issued proposed regulations (REG-100320-20) to provide guidance on withholding from periodic payments for pensions, annuities, and other deferred income. The proposed regulations update certain provisions to conform to a change made by the Tax Cuts and Jobs Act (TCJA).
Prior to amendment by TCJA, the default rate of withholding on periodic payments under Section 3405(a), was determined by treating the payee as married and claiming three withholding allowances. To reflect changes made by TCJA, the proposed regulations would eliminate this requirement and instead provide that in the case of any periodic payment with respect to which a withholding certificate is not in effect, the amount withheld from the periodic payment will be determined under rules prescribed by the Treasury Secretary.

The proposed regulations would provide a flexible and administrable rule that leaves the communication and mechanical details of the default rate of withholding on periodic payments to be provided in applicable forms, instructions, publications and other guidance. The regulations are proposed to apply to periodic payments made after Dec. 31, 2020.

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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