Under that exception, individuals receiving payments calculated under the fixed amortization or fixed annuitization method may switch to the RMD method without triggering the tax, but they must follow the RMD method in all later years. That guidance specified the life expectancy tables that could be used to determine the distribution periods under these methods, and set certain other rules, including permissible interest rates and a one-time exception to the statutory rule that precludes modification of substantially equal periodic payments. (There are also other exceptions to the tax-e.g., for distributions after death or attaining age 59 1/2.) In Revenue Ruling 2002-62 (see our Checkpoint article), the IRS described three methods for calculating the annual amount of such payments: the required minimum distribution (RMD) method, the fixed amortization method, and the fixed annuitization method. The IRS has updated its guidance regarding when payments from qualified retirement plans (including 401(k) plans, other tax-qualified plans, and IRAs) are considered substantially equal periodic payments that are not subject to the 10% additional tax on early distributions. If you have tax or withholding questions, we recommend you consult a tax professional or the IRS website at. You should keep in mind that DFAS is unable to provide tax advice. We cannot process a W-4 that is not signed and dated. Step 5 is the filer’s signature and date. DFAS cannot process these, so we will leave the tax withholding as is and send a letter. Some retirees have sent W-4s with additional income or withholding that causes their net pay to be zero. On the new W-4, taxpayers now must choose either Single, Married, or Head of Household instead of the previous statuses where a taxpayer may have chosen, for example, Married with two deductions (M-02) or Single with no deductions (S-00).įor Step 3 and Step 4, you should follow the instructions carefully. Step 1 is Personal Information, including filing status. Without this information, DFAS cannot process any updates to your account. On the new IRS W-4 form, Step 1 and Step 5 are the critical steps that need to be filled out. The word “EXEMPT” must be written above the signature date. Retirees claiming exemption from federal taxes must submit a new W-4 every year. It’s important to note that you are not required to file a new IRS Form W-4, unless you are claiming exemption from federal taxes. You can also mail or fax DFAS a new 2020 IRS Form W-4 to request a change in your federal withholding. You can verify and update your tax withholding information easily in myPay by clicking on “Federal Withholding” under “Pay Changes” in the menu on the left. Because of this guidance, some people saw an increase in their tax withholding. These changes were made because of guidance from the IRS that provided different withholding based on a retiree’s previous tax status. One is that the Internal Revenue Service (IRS) issued a new 2020 IRS Form W-4 that is quite different from previous Form W-4s.Īnother change is that the 2020 tax tables from the IRS created some withholding changes, even for those who did not request a change to their individual withholding. The Tax Cuts and Jobs Act of 2017 brought many changes, some of them quite recently. What Retirees Need to Know about the New IRS 2020 W-4
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