Determine Pension Withholding using Form W-4P

[rickclo]

I'm 73, retired, and married, filing jointly. We have combined income from NO JOBS. Taxable income comes from 1) Pension, 2) Annuity, 3) Social Security, and 4) IRA Required Minimum Distributions. I'm trying to figure if I need to make periodic payments next year and/or apply this year's rebate to next year taxes. None of the instructions for Form W-4P include that scenario. I'm unclear on Form W-4P Step 2b (i and ii).

If I have NO JOB, do I consider the income from the highest source as the "job" income not to include in Step 2b(ii)?

[ErnieS0 · Accepted solution]

Your pension, annuity, required minimum distributions and possibly part of your Social Security are taxable.

You can have income tax withheld from all of those sources of income or you can make periodic payments.

Enter your taxable Social Security on Form W-4P Step 2(b)(i) from Form 1040 line 6b.

On Step 2(b)(ii) enter the total amount of pension/annuity income from all other pensions and annuities except the one you are filing Form W-4P for.  That will be the total of Form 1040 lines 4b and 5b minus the pension your are working on.

[rickclo]

The answer from @ErnieS0 was sooo good, it made clear to me that I was using the wrong form, altogether! How often does THAT happen? Ha ha. Instead of using Form W-4P, I really needed Form 1040-ES. Thank you, @ErnieS0. 

[TAH2]

ErnieSO,

My question is very similar, but I am not clear on your response.  

I file jointly with my wife.  We are fully retired, no jobs.  We have three pensions and Social Security income.  

I'm not clear on Form W-4P.  Step 2(b)(i) is specifically for work related income, correct? We do not work.

Step 2(b)(ii) is where we list pensions/annuity total income.  But what does "pay less annually than this one" mean?  It seems to want the total of all our pensions/annuities on this line, correct?

Step 4(a) is where I enter our total taxable Social Security income, correct?

Do I mail identical Form W-4Ps to each of our pension payers and Social Security?  I understand that my wife's name and SSN would be on her W-4P, but otherwise the data would be the same, correct?

Thanks for your assistance.

TAH2

[Vanessa A]

Step 2(b)(ii) But what does "pay less annually than this one" mean? This means for the pension you are filling this form out for, is it more than your other pensions.

Step 4(a) is where I enter our total taxable Social Security income, correct? Yes, this is where you would enter your total taxable Social Security.  Depending on your pensions and total Social Security, this could be up to 85% of your total benefits received. 

Do I mail identical Form W-4Ps to each of our pension payers and Social Security? I understand that my wife's name and SSN would be on her W-4P, but otherwise the data would be the same, correct?   Possibly.  If one pension is more, Step 2 may have different numbers on it as only one would be the highest paying pension. You also may not want to have the same "extra" withholding in step 4 withheld on all pensions. So the data may be different in section 2 and 4. 

[ktport]

If you leave Form W-4P Step 2 and Step 3 blank, the federal withholding will be $437.30 (as of around 4-1-2023). Then, if you need more withheld, enter the additional amount in Step 4(c).

[OldMayfield]

Thanks Vanessa and Ernie, very helpful answers.  One more detailed question.  

My wife and I are retied with two sources of income:  my pension and a monthly distribution from my 401K.  Our monthly income from each is equal to the other, i.e., each contributes 50% of my monthly income.

My current withholding is too low, so I am submitting a new W-4P to the pension provider.  If I include the income from my 401K on line 2(b)(ii) will withholding on my pension be doubled to accommodate the 401K distributions (from which income tax is already withheld)?

Or should I ignore line 2(b)(ii) and simply complete a new W4-P (or whatever) for my 401K distributions as well?

[TAH2]

ktport,

Thanks, this is what I ended up doing.  Seems crazy that you basically have to ignore the form fields and just fill in how much you want withheld, but that's the solution.

TAH2

[Mgoldy]

I have a diff scenario - I have a pension of 38K a year.  I have had other jobs that add up to about 24k.  But those jobs withheld Fed tax.  Do I still enter that amount on Line 2(b)(i)?  even if taxes were withheld, and in doing so how much will be withheld going forward based on this update?

[ahalls3318]

How do I fill out this form. If I just sign it will they take out taxes automatically from pension?

[Quicksilver1]

I don't understand any of this W-4P withholding stuff. I use turbotax to determine my income tax and What should be deducted etc? Honestly; I already put all this information in my 2022 taxes. Now I've got to go back

into my taxes and figure out what goes where on this new form? It's a little much for me. I don't know who to ask

or what to ask.

[NCperson]

@Quicksilver1 - if you want to do it simply, just take the tax you expect to owe on April 15 and divide by 4 - make those estimated quarterly payments at the IRS website.  Simple.  no forms required, 

[Quicksilver1]

Thank you for the suggestion.

I don't wish to give the IRS any money or estimated quarterly payments during the year.

I've got one pension, no job, and filing jointly. So this should be a simple process filling

in the information but as usual the IRS want's to make it difficult.

[NCperson]

@Quicksilver1 so you are filling this out for the adminstrator of the pension? 

simply check box 1c - filing joint. sign it and send it in. 

if you expect to owe less than $1,000 at tax time there is no penalty in any event. 

that's all you have to do!