Publication 575 - Pension And Annuity Income - 2004 Page 8
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36tax. For more information, see Repayments in Publication
may be subject to the 30% flat rate withholding that applies
525.
to nonresident aliens. This 30% rate will not apply if you are
exempt or subject to a reduced rate by treaty. For details,
get Publication 519, U.S. Tax Guide for Aliens.
Withholding Tax
and Estimated Tax
Periodic payments. Unless you choose no withholding,
your annuity or similar periodic payments (other than eligi-
Your retirement plan distributions are subject to federal
ble rollover distributions) will be treated like wages for
income tax withholding. However, you can choose not to
withholding purposes. Periodic payments are amounts
have tax withheld on payments you receive unless they are
paid at regular intervals (such as weekly, monthly, or
eligible rollover distributions. If you choose not to have tax
yearly) for a period of time greater than one year (such as
withheld or if you do not have enough tax withheld, you
for 15 years or for life). You should give the payer a
may have to make estimated tax payments. See Estimated
completed withholding certificate (Form W-4P or a similar
tax, later.
form provided by the payer). If you do not, tax will be
The withholding rules apply to the taxable part of pay-
withheld as if you were married and claiming three with-
ments you receive from:
holding allowances.
Tax will be withheld as if you were single and were
•
An employer pension, annuity, profit-sharing, or
claiming no withholding allowances if:
stock bonus plan,
•
•
You do not give the payer your social security num-
Any other deferred compensation plan,
ber (in the required manner), or
•
A traditional individual retirement arrangement (IRA),
•
The IRS notifies the payer (before any payment is
or
made) that you gave an incorrect social security
•
A commercial annuity.
number.
For this purpose, a commercial annuity means an annuity,
You must file a new withholding certificate to change the
endowment, or life insurance contract issued by an insur-
amount of withholding.
ance company.
Nonperiodic distributions. Unless you choose no with-
There will be no withholding on any part of a
holding, the withholding rate for a nonperiodic distribution
TIP
distribution that (it is reasonable to believe) will
(a payment other than a periodic payment) that is not an
not be includible in gross income.
eligible rollover distribution, is 10% of the distribution. You
can also ask the payer to withhold an additional amount
Choosing no withholding. You can choose not to have
using Form W-4P. The part of any loan treated as a
income tax withheld from retirement plan payments unless
distribution (except an offset amount to repay the loan),
they are eligible rollover distributions. You can make this
explained later, is subject to withholding under this rule.
choice on Form W-4P for periodic and nonperiodic pay-
ments. This choice generally remains in effect until you
Eligible rollover distribution. If you receive an eligible
revoke it.
rollover distribution, 20% of it generally will be withheld for
income tax. You cannot choose not to have tax withheld
The payer will ignore your choice not to have tax with-
from an eligible rollover distribution. However, tax will not
held if:
be withheld if you have the plan administrator pay the
•
You do not give the payer your social security num-
eligible rollover distribution directly to another qualified
ber (in the required manner), or
plan or an IRA in a direct rollover. For more information
•
about eligible rollover distributions, see Rollovers, later.
The IRS notifies the payer, before the payment is
made, that you gave an incorrect social security
Estimated tax. Your estimated tax is the total of your
number.
expected income tax, self-employment tax, and certain
other taxes for the year, minus your expected credits and
To choose not to have tax withheld, a U.S. citizen or
withheld tax. Generally, you must make estimated tax
resident must give the payer a home address in the United
payments for 2005 if your estimated tax, as defined above,
States or its possessions. Without that address, the payer
is $1,000 or more and you estimate that the total amount of
must withhold tax. For example, the payer has to withhold
income tax to be withheld will be less than the smaller of:
tax if the recipient has provided a U.S. address for a
nominee, trustee, or agent to whom the benefits are deliv-
1. 90% of the tax to be shown on your 2005 return, or
ered, but has not provided his or her own U.S. home
2. 100% of the tax shown on your 2004 return.
address.
If you do not give the payer a home address in the
If your adjusted gross income for 2004 was more than
United States or its possessions, you can choose not to
$150,000 ($75,000 if your filing status is married filing
have tax withheld only if you certify to the payer that you
separately), substitute 110% for 100% in (2) above. For
are not a U.S. citizen, a U.S. resident alien, or someone
more information, get Publication 505, Tax Withholding
who left the country to avoid tax. But if you so certify, you
and Estimated Tax.
Page 8
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