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The Treasury Department and the Internal Revenue Service issued a proposed regulation Wednesday updating the federal income tax withholding rules for periodic retirement and annuity payments made after Dec. 31.
Chris Shankle, senior vice president at Argent Retirement Plan Advisors and a member of the AICPA Employee Benefits Tax Technical Resource Panel, told ThinkAdvisor in a Wednesday email message that, prior to the proposal, "the withholding process was to treat everyone as married with three exemptions. In this manner recipients could specify the withholding needed by referring to worksheets, online tools and the completing of a specified withholding election form to arrive at a 'better fit' for their situation."
In Notice 2020-3, the IRS provided that, for 2020 the default rate of withholding on periodic payments will continue to be based on treating the taxpayer as a married individual claiming three withholding allowances when no withholding certificate is in effect.
