IRS law changed withholding

[Deacon07]

I am a widow receiving an annuity based on my late husband's military pension. In 2021 tax withheld was $848. In 2022 tax withheld was $87 in Jan, and zero in subsequent months. (And yes, I kick myself for not realizing the change.)

The fed agency (Defense Financial & Accounting Services) that processes annuity payments explained that in Feb 2022, a new law required IRS to publish a new "tax chart" which DFAS used to adjust amount withheld to zero. So, while my W4 status remained the same, the amount withheld changed to zero. DFAS also indicated IRS reversed - rescinded its "tax chart" and put in a new "tax chart" but apparently did not resume withholding to where it should be. And oh yes, numerous annuitants have been caught off guard. The worst part is no one is talking about this, at least that I can find by searching various fora online.

I need help answering: 

> where do I find this IRS "tax chart"?

> how do I fix this going forward so that an appropriate amount is withheld?

> will I be slammed with a penalty for under withholding?

I greatly appreciate any help given on this forum.

[DavidD66]

The "tax chart" that you are referring to is part of the IRS withholding tax publication.  You can access the chart you are referring to in IRS Publication 15-T - Federal Income Tax Withholding Methods.  In order to "fix this going forward" you will need to change your withholding.  There are two ways to change your military retirement pay withholding. You can call the Retiree Pay customer service number at DFAS at 888-332-7411. Or, you can make changes online via DFAS's myPay secure web- based pay management system.  For more information on changing your withholding, click on the following link:  Federal Income Tax Withholding after Leaving the Military

Will you be "slammed" with a penalty?  I doubt there will be much of a penalty if any, assessed for underpayment of estimated tax.  Even if a penalty is assessed, the underpayment of estimated tax penalty is simply interest, based on the amount of under payment.  The interest rate for 2022 was 3% to 6% throughout the year.