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IRS Releases Draft Form W-4P

Practice Management

The IRS has released a draft version of Form W-4P, Withholding Certificate for Pension or Annuity Payments for review and feedback. 

This is not the first early release of a draft of Form W-4P in 2021; in fact, it is the fourth. The IRS has issued this draft only to provide a revised worksheet for computing withholding and information regarding the implementation of the 2022 Forms W-4P and W-4R. 

The 2022 Form 

The 2022 Form W-4P has been split into two forms, Form W-4P for periodic pensions and annuities, and new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions. This latest draft Form W-4P includes:

  • a draft payer overview; 
  • a revised worksheet for computing withholding based on the entries on the form; and 
  • an optional computational bridge that describes how to convert data fields and figure federal income tax withholding on 2021 or earlier Forms W-4P as if they were 2022 or later Forms W-4P. 

The IRS does not anticipate changes to these computational steps, and says that this draft form may be relied upon for purposes of systems programming. 

The payer instructions, worksheet, and computational bridge will be included in some form in the 2022 Pub. 15-T. The last time that Pub. 15-T was revised was in December 2020. The final version of the redesigned Form W-4P will include updates to the Step 4(b)—Deductions Worksheet for indexed numbers for 2022 and the final versions of the redesigned Form W-4P and Form W-4R may include text changes to the forms and instructions. 

Postponed Requirement 

The revised Form W4-P for 2022 use has not yet been released. The IRS does say, however, that based on comments received on the drafts regarding the time required by payors to implement the new forms, the IRS will postpone the requirement to begin using the redesigned forms until Jan. 1, 2023. 

The IRS says that payors should update their system programming for these new forms and encourages them to begin using them in 2022 as soon as programming is in place, but may otherwise continue to use the 2021 Form W-4P. Withholding tables for 2022 will work with both sets of forms. The 2021 Form W-4P will no longer be available for use after Dec. 31, 2022.