Changes Go Into Effect January 1, 2023
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 Nonperiodic Payments and Eligible Rollover Distributions). Form W-4P applies to PERA retirees and benefit recipients who receive ongoing PERA benefit payments; Form W-4R applies to anyone receiving a lump-sum distribution of their PERA account or as a named beneficiary of a deceased PERA member’s account. These forms will be used for requesting or electing any federal tax withholding changes beginning in 2023. The PERA Withholding Preference Form will no longer be accepted after December 15, 2022.
PERA retirees and benefit recipients who are currently receiving ongoing PERA benefit payments and who do not wish to make changes to their federal tax withholding elections are not required to file a new form, but PERA recommends that you complete the new W-4P form for 2023 to ensure you have the appropriate tax amount withheld.
PERA anticipates that you will be able to update your tax withholding elections online and by paper forms in December 2022 for changes to take effect January 1, 2023.
If you live in Colorado and wish to change your state tax withholding election after the new W-4P is implemented by PERA, you will need to submit a separate state tax withholding form.
Please note that PERA cannot provide tax advice, including advice about how to complete these forms. If you have questions about your particular situation, please contact a tax or legal advisor.
The IRS made changes to withholding and issued new forms for retirement plans to use. The primary change is that there are now two forms: the W-4P for ongoing payments and the W-4R for single or lump-sum distribution payments. The W-4P form no longer allows tax filers to adjust their withholdings by electing a specific number of withholding allowances. Instead, the W-4P form has new input fields for increasing or decreasing the amount to withhold, including fields for tax credits and deductions. The W-4R form simply provides an opportunity to change the withholding percentage from the default withholding to a different withholding percentage.
No, if you are receiving ongoing PERA benefit payments and don’t wish to change your withholding elections, you are not required to submit a new tax withholding election form (W-4P). PERA will continue to withhold federal income tax from your benefit payments based on the elections we have on file. However, in order to ensure you have the appropriate tax amount withheld, PERA recommends that you complete this new form in 2023. This is especially true for those benefit recipients who elected a flat dollar or flat percentage to be withheld in place of the current tax tables.
If you make no changes to your federal tax withholding elections, PERA will use the IRS method to bridge your tax table elections over to the new methodology as of January 1, 2023. This bridging, in most cases, will adjust your withholding accordingly. If your current election is to withhold zero federal tax, a flat dollar amount tax or flat percentage tax, those elections will remain the same, but may be incorrect withholding amounts under the new IRS guidelines, which is why PERA recommends submitting the new W-4P form for 2023.
Log in to your PERA account and select the “Forms & Calculators” menu to access “View all Forms.” From there, select the “Tax Withholding” menu, which will take you to the electronic form and follow the prompts to complete and submit.
Summary of Changes for IRS Form W-4P
- You may now select one of the following marital status options:
- Single or Married filing separately
- Married filing jointly or Qualifying widow(er)
- Head of household
- Reflects income from multiple jobs/pensions/annuities
- Claim dependent and other credits
- Default withholding is now Single with no adjustments (changed from Married with three (3) allowances)