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W-4P Form

W-4P Form

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Frequently Asked Questions

The IRS released a revised Form W-4P (Withholding Certificate for Periodic Pension or Annuity Payments) and a new Form W-4R (Withholding Certificate for Non-periodic Payments and Eligible Rollover Distributions) that include changes to the federal tax withholding elections available, as well as changes to the calculation HMEPS performs to determine the amount to be withheld from HMEPS benefit payments, as of January 1, 2023. A significant change to the W-4P form is that filers will no longer be able to adjust their withholding by electing a specific number of withholding allowances. The IRS now offers new input fields for increasing or decreasing the amount to withhold, including fields for tax credits and deductions. IMPORTANT NOTE: HMEPS retirees and beneficiaries who already receive ongoing payments that began prior to 2023 and who do not wish to make changes to their federal tax withholding elections are not required to file a new form. 1. Why are federal tax withholding elections changing?
 The federal Tax Cuts and Jobs Act of 2017 changed the way income tax is calculated, including an increased standard deduction and removal of the dependent exemption. Because withholding allowances previously were tied to the dependent exemption, the IRS changed its procedures for calculating federal income tax withholding following removal of the dependent exemption. 2. How is the new federal tax withholding election form for periodic payments different from the prior form?
 Previously, federal tax withholding calculations for non-rollover eligible periodic payments were based on the filing status (married or single) and number of withholding allowances reported on your federal tax withholding election form. The new calculation allows an additional filing status of “head of household” and no longer uses withholding allowances. It also allows new fields for adjusting the amount to be withheld by incorporating other income, deductions and tax credits into the calculation. While the new form and calculation are more complex, they are intended to more accurately approximate the amount of tax due at the end of the year when completed correctly. 3. How is the new federal tax withholding election form for non-periodic (lump-sum) and rollover eligible periodic payments different from the prior form?
 The default federal tax withholding for these payments is not changing. As in previous years, default federal tax withholding is 10% for non-rollover eligible, non-periodic payments (withholding optional) or 20% for all rollover eligible payments, whether periodic or non-periodic (withholding mandatory). However, with the new Form W-4R, you may also designate a specific percentage higher or, in some cases, lower than the default rate. For non-periodic payments, you may choose a withholding rate of 0% to 100% unless you live outside the United States. For rollover eligible payments, you can choose a withholding rate greater than 20% but may not choose a lesser rate. 4. Am I required to file a new tax withholding election form even if I do not intend to change my tax withholding elections?
 No, if you are receiving ongoing benefits and you do not wish to change your withholding elections, you are not required to submit a new tax withholding election form. HMEPS will continue to withhold federal income tax from your benefit payments based on the election we have on file or, if no election is on file, we will apply the default withholding rate (married with three allowances). If you have a DROP balance and elect to receive a non-periodic payment, the default withholding will apply. However, if you wish to change your withholding election to a percentage other than 10% for a non-rollover eligible DROP payment or increase your withholding election to a percentage greater than 20% for a rollover eligible DROP payment, you should submit a new IRS Form W-4R. 5. What happens if I don’t submit an IRS Form W-4P?
 • For new monthly payments (benefits starting in 2023 or later): If you do not complete and return the IRS Form W-4P, HMEPS will withhold federal income tax from your monthly payments as if your filing status is single with no adjustments. Also, if the IRS Form W-4P that you submit does not have your SSN or has an incorrect SSN, HMEPS will withhold federal income tax from your monthly payments as if your filing status is single with no adjustments. If the IRS Form W-4P you submit is incomplete or unclear, it may be necessary for HMEPS to withhold federal income tax from your monthly payments as if your filing status is single with no adjustments until you submit a compliant IRS Form W-4P and HMEPS has a reasonable time to implement your requested withholding changes. • If you are already receiving monthly benefits: Your current withholding election (or your default rate) remains in effect unless you submit a new IRS Form W-4P to advise us of any requested federal tax withholding changes. 6. If I make no changes to my federal tax withholding election, will my federal tax withholding amount stay the same? If you make no changes to your federal tax withholding election, HMEPS will continue to withhold federal income tax from your benefit payments based on the election we have on file. However, the actual amount withheld may change due to a difference in rounding when HMEPS transitions from the current monthly tax withholding tables to the new annual tax withholding tables. Your federal tax withholding may also change when tax tables are updated annually or when your benefit amount changes. 7. Am I allowed to update my filing status or additional amount to be withheld without changing the number of withholding allowances I claim for my annuity payments? Beginning January 1, 2023, any update to your federal tax withholding election for annuity payments must be on the new IRS Form W-4P, which does not use allowances to calculate federal tax withholding. Therefore, when you file a new federal income tax withholding election form, any existing withholding allowances will cease to be used, and your federal tax withholding will be calculated using the new method. Use the instructions and worksheets on IRS Form W-4P available at irs.gov. 8. When will the new forms and calculation take effect?
 Any new benefits beginning on or after January 1, 2023, are subject to the new forms and calculation. Also, any changes in federal tax withholding elections that take effect on or after that date must use the new form fields and calculation method. The IRS Forms W-4P and W-4R are available at irs.gov. The Form W-4P is available on the retiree page at www.hmeps.org beginning in December 2022. 9. When is the deadline to submit changes using the existing format that includes withholding allowances?
 HMEPS will accept changes using the existing form, including withholding allowances, for forms that are received by HMEPS prior to December 31, 2022. 10. When will I be able to make elections using the new format? We expect you’ll be able to update your tax withholding using the new form in December 2022 for changes to take effect January 1, 2023. 11. How long will my election remain in effect? For your ongoing monthly benefit payments, your income tax withholding preferences will remain in effect until you change them. If you elect to receive a non-periodic payment, such as a partial DROP distribution, and wish to elect withholding other than the default rate, then a new Form W-4R is required for each distribution. 12. I receive two different benefits (retirement and survivor) each month. Can I withhold taxes differently on each one? If you receive different types of monthly payments from HMEPS, you may elect a different tax withholding amount for each type of payment. You may complete a separate IRS Form W-4P for each payment type and mail it to HMEPS. Indicate at the top of each form the type of payment to which it applies. 13. How do I know if I need to have federal income tax withheld from my monthly benefits? That depends on your personal financial situation. We recommend that you speak with your tax professional or the IRS to determine the tax withholding strategy best for you. The instructions included with the IRS Form W-4P also include information that may help you make this determination. 14. Where can I find more information about these changes and about tax withholding? See IRS Publication 15-T and Publication 505, Tax Withholding and Estimated Tax at irs.gov for more information.

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