The IRS revised its withholding tables in February to reflect the new Making Work Pay credit. The new credit will result in more take-home pay for more than 120 million American households. But many retirees with pensions won’t qualify for the credit and thus could end up underwithholding for the year. This could reduce an expected tax refund or create an unexpected tax bill.
Strategy: Rely on the new IRS withholding procedures. If you’re entitled to receive pension payments, you can take advantage of the latest adjustments. (IRS News Release IR-2009-50)
The new withholding procedures are part of a larger outreach program designed to educate taxpayers about the tax benefits of the new economic stimulus law. The IRS, working with partner groups, will provide taxpayers information
on appropriate withholding for their situations. It will also develop a variety of information products, including brochures, video and audio materials.
Numerous factors, such as outside jobs and other earned income, can affect the amount, if any, of withholding needed by taxpayers receiving a pension. The optional adjustment procedure, which may be used by those paying pensions, is available in Notice 1036-P, Additional Withholding for Pensions for 2009. The online version of Pub. 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables has already been updated.
Pension payers aren’t required to use this new procedure and may continue to use the February 2009 withholding tables. For plans that adopt the new procedure, withholding on pension payments will be automatically adjusted with no action needed by retirees.
Tip: The IRS is also encouraging pension payers who choose to use the new procedures to contact retirees who previously submitted a Form W-4P, Withholding Certificate for Pension or Annuity Payments, requesting additional withholding.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/27096/avoid-withholding-snafu-on-pension-payments "