Overview
On December 17, 2024, the Internal Revenue Service (IRS) posted the 2025 version of Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions. Form W-4R, mandatory to use for many IRA distributions taken in 2023 and later, brought significant changes to the federal income tax withholding process.
Main points
1. Annual Revision: The IRS will update Form W-4R annually, incorporating Marginal Rate Tables that are subject to annual adjustments. This ensures that IRA recipients of IRA distributions and IRA custodians and trustees stay current with the latest withholding guidelines.
2. Withholding Election: Recipients can choose any percentage (zero to 100 percent in a whole number only) of a taxable IRA distribution to be withheld and remitted to the IRS. Notably, this is a departure from previous election limitations and offers greater flexibility to IRA distribution recipients.
3. Default Withholding Rate: In the absence of a specific withholding election, the default withholding rate is set at 10 percent of an IRA distribution. This is a critical point for IRA distribution recipients who have not made an election.
Background
Before the introduction of Form W-4R, IRA distribution recipients used Form W-4P to make a federal income tax withholding election. However, Form W-4R is now used to make a federal income tax withholding election for taxable nonperiodic payments, encompassing many IRA distributions.
Wolters Kluwer forms' users
Wolters Kluwer forms' users have access to IRS Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions (Form IRA-W-4R-LAZ). While this form is not included on traditional and SIMPLE IRA distribution-related forms due to its denser content and annual updates, Wolters Kluwer ensures convenient access for IRA custodians and trustees.
