IRS Postpones Until 2023 Required Use of Updated Forms W-4P, W-4R
On November 5, 2021, the IRS issued a fourth draft of the 2022 Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments. In it, the IRS indicates that final versions of the redesigned Form W-4P and Form W-4R will be released for 2022. The IRS also indicates that, based on comments received from stakeholders on previous drafts, the IRS will postpone until January 1, 2023, requirements to begin using the redesigned forms. Payors should update their system programming for these new forms but may otherwise continue to use the 2021 Form W-4P.
The revised Form W-4P will only be used to withhold federal income tax from periodic retirement plan and IRA payments. Periodic payments are installment payments at regular intervals generally over a period of more than one year. The new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions, will be used for nonperiodic and rollover distributions. Nonperiodic distributions are subject to a 10 percent withholding rate unless a different rate is elected. Eligible rollover distributions are subject to a mandatory 20 percent withholding rate on the taxable amount of the distribution unless a higher rate is elected. A third draft of Form W-4R was issued on November 10, 2021.
Both recent drafts of Forms W-4P and W-4R state that included computational steps should not change and can be relied upon for system programming purposes.
