Withholding in 2023

Withholding for federal (and where applicable) state income taxes on wages is mandatory, but you can tell employers whether you need additional withholding. Consider filing a new Form W-4 for 2023.

Withholding on pensions and annuities. Participants and beneficiaries who are receiving distributions from qualified retirement plans, IRAs, or annuities have new withholding forms to deal with in 2023. If you are among them, you need to complete a new form–Form W-4R–to have payers withhold the correct amount of federal income tax from nonperiodic payment or eligible rollover distribution from an employer retirement plan, annuity, or IRA). But Form W-4R isn’t used for periodic payments, meaning payments made in installments at regular intervals over a period of more than 1 year) from these plans or arrangements. Instead, use Form W-4P, which has been revised for 2023. Applicable withholding rates are as follows:

• For nonperiodic payments, on Form W-4R the default withholding rate is 10%. But you can choose to have withholding at a rate of 0% to 100%; enter the desired rate on line 2 of the form. For payments delivered outside the United States and its territories, 10% is the minimum rate.
• For an eligible rollover, the default rate is 20%, but you can choose a higher rate.
• For periodic payments, withholding is automatic—based on filing status, income from a job or multiple pensions and annuities, claiming the child tax credit, or other adjustments—but you can choose on the W-4P to not have withholding.