Taxing on Monthly Pension Payments

[H4T3m4t2]

Is it possible to not have federal and state taxes withheld from monthly pension payments if you plan to deposit the entire payment into a traditional IRA within 60 days of receipt?  Right now, we're having federal and state taxes withheld each month, and we're contributing the net amount into the IRA.  We have to come up with the taxed amount to equal the gross amount for it not to be taxed further.  We're paying taxes on it each month and when it's time to have the distributions from the IRA several years down the road, we'll be taxed on the distributions yet again.  BTW, they will not do a direct rollover.  Thank you for your help.

[VolvoGirl]

No you can't  do that.  Your pension will be taxable.  But you can do anything you want with the payments  except you can't "roll it over" to a IRA  like within the 60 days.   That is only for 401K or IRA plans.   You have to take the pension and pay tax on it.     You can use the the money to make a NEW IRA contribution providing you are eligible to make a contribution.  You need W2 wages or a net profit from self employment income to make a IRA contribution.   

[dmertz]

As VolvoGirl said, periodic payments paid for life or a period of more than 10 years are ineligible for rollover and the taxes on the taxable amount cannot be avoided.  Otherwise, you can use the cash for whatever you want, including funding an ordinary IRA contribution as long as you or your spouse have the necessary compensation to  support the contribution.  An ordinary traditional IRA contribution may or may not be deductible depending on filing status, modified AGI for the purpose and whether you or your spouse is an active participant in a workplace retirement plan.

You can adjust your federal tax withholding by submitting Form W-4P to the pension plan.