State Withholding Requirements for Qualified Plan and IRA ...

Table 2: 2013 State Withholding Rates and Rate Calculations for Qualified Retirement Plan and IRA Plan Distributions

NOTE: Use of the terms "periodical" and "non-periodical" is the same as defined for federal purposes under IRC '3405 and related federal regulations. Where there are special state applications to "eligible rollover distributions" (ERDs) as defined in IRC '3405 subject to federal withholding at 20%, they are so noted in the table.

11102013 (replaces 11012013) DC updated to add link to FR 230.

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

Minimum Dollar Amount

Comments

Authority with Hyperlink

Other Authority

Alabama (as of Wage tables at

5%

03/13/2013)



withh

olding/whbooklet

_0213.pdf

In Alabama,

payers may elect

to treat

distributions as

"wages" and if

elected

compliance

follows wage

treatment. ADOR

prefers that you

use the tables for

periodical

payments and if

so, an A-4 is

needed from

payee. In the

alternative, payer

can treat the

payment as a

supplemental

wage and

withhold 5%

where no A-4 is

Withholding can be effected on a voluntary basis. Must have A4, Employee's Exemption Certificate, to use wage tables or withhold supplemental rate if agreed upon. If use periodical tables and receive an A-4, two withholding exemptions have been added: "H" and "MS." "H" indicates an employee is single, has one or more qualifying dependents, and is claiming head of family. Withholding exemption "MS" indicates an employee is married, but filing a separate return. "H" has the same value as the "M" exemption, and "MS" has the same value as the "S" exemption. A withholding exemption

incometax/1we breghold/810-03-075MN.htm#reg81037504

Alabama Department of Revenue Administrative Code ?810-3-75-.04

See . gov/withholding/whbookl et_0213.pdf

State

Alaska

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

required.

Minimum Dollar Amount

Comments

of "0" indicates that no personal exemption is selected. A withholding exemption of "S" indicates that a full personal exemption is selected. A withholding exemption of "M" indicates that personal exemptions for both spouses are being selected. [Rule 810-371-.02]

No state income tax

Authority with Hyperlink

Other Authority

Arizona (as of 12/17/2012)

Effective 7/1/2010, AZ adopted tables no longer tied to the federal withholding rate. New rates to be elected on Form A-4P are: 0.8%, 1.3%, 1.8%, 2.7%, 3.6%, 4.2%, and 5.1%. Rates are to be applied to the taxable amount of distribution as reported in Box 2a of federal Form 1099-R.

No withholding permitted on nonperiodic or other lump sum distribution.

Effective7/1/2010, withholding is a percentage of taxable amount of the distribution as reported in Box 2a of federal Form 1099-R and no longer a percentage of federal withholding. New rates are to be elected by the payee on A-4P; A-4P needs to be on file to support withholding.

See current A-4P at

rms/Withholding.aspx

siness/WithholdingTax.a spx

nkClick.aspx?fileticket=f 69LSkeUCDI%3d&tabid =241

A.R.S. ?43-404; AZ Withholding Tax Ruling WTR 99-2.

Historical note: Each pension or annuity recipient electing withholding when the change in withholding regime occurred in 2010 were required to file a revised Form A-4P to elect a new withholding percentage and take into consideration the change in the withholding base. Notifications of the changes were required to be provided to payees. See Table 3.

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

Minimum Dollar Amount

Comments

Authority with Hyperlink

Other Authority

Prior to the change, withholding was a percentage of federal withholding. Rates decreased from 2009 for 1/1/2010 through 6/30/2010 to: 10.7%, 20.3%, 24.5%, 26.7%, 33.1% or 39.5% of federal tax withheld as specified on A-4P.

After 6/30/2010, new A4Ps were required and new designated percentages applied.

Rates from 5/1/2009 through 12/31/2009 were: 11.5%, 21.9%, 26.5%, 28.8%, 35.7% or 42.6% of federal tax withheld as specified on A-4P.

Arkansas (as of 10/04/2013)

Must use wage tables. Under current law, specific dollar amounts cannot be designated unless as an additional amount to be withheld on line 5 of AR4P. If

3% of taxable amount for IRAs and other non-

periodical payments unless

ERD. 5% for all ERDs

(direct distributions that would be eligible

for rollover)

3% for IRAs and other nonperiodical

distributions; 5% for ERDs

Arkansas allows annuitants who receive benefits from an employment-related annuity plan or qualified IRA distribution to exempt the first $6,000 of benefits received. Must submit AR 4P to claim exemption.

.gov/offices/incomeTax/ withholding/Documents/ AR4P.pdf

Current employer guide and tables are dated 12/7/1998. See at .gov/offices/incomeTax/ withholding/Documents/

Arkansas Act 1309 of 2005 adopting IRC ?3405; A.C.A. ?26-51-918; State of Ark. Employee's Exemption Certificate for Pensions and Annuities. . gov/offices/incomeTax/w ithholding/Documents/A R4P.pdf

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

payee fails to submit AR4P, the payer must withhold on periodic payments as if payee was married claiming three withholding allowances.

The agency has announced that withholding tables will change for 2014 and 2015 to accommodate recent rate changes. See comment column.

Minimum Dollar Amount

Comments

Authority with Hyperlink

May not elect out of withholding if recipient of ERD, or with address for payment outside the U.S. or its possessions, or if a nonresident alien. If payee submits an AR4P that fails to contain a correct taxpayer identification number (TIN), the payer must withhold as if payee is single claiming zero withholding allowances even if they choose not to have state income tax withheld. See instructions to AR 4P.

withholdTaxTables.pdf .

Withholding formula for periodicals is available at . gov/offices/incomeTax/w ithholding/Documents/w hformula.pdf

Wage tables are at . gov/offices/incomeTax/w ithholding/Documents/wi thholdTaxTables.pdf and for low income at . gov/offices/incomeTax/w ithholding/Documents/wi thholdTaxTablesLowInc ome.pdf

Other Authority

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

Minimum Dollar Amount

Comments

Authority with Hyperlink

For when to use the low income tables see instructions to AR 4P.

The following tax rates become effective in 2015 except for the lowest rate which will be effective in 2014: $0 to $4,099 of net income: 0.9%; $4,100 to $8,199 of net income: 2.4%; $8,200 to $12,199 of net income: 3.4%; $12,200 to $20,399 of net income: 4.4%; $20,400 to $33,999 of net income: 5.9%; and $34,000 or more of net income: 6.9%. Inflationadjustments are part of the legislation. In addition, the Arkansas personal income tax standard deduction is increased from $2,000 to $2,200 per taxpayer for tax years beginning after 2014. [H.B. 1585 and H.B.1966 (Act 1488), 2013]

The agency has announced that withholding tables will change for 2014 and 2015

Other Authority

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

California (as of 11/01/2013)

California allows 3 different withholding options: (1) 10% of the amount of the computed federal withholding tax; (2) California wage withholding tables using DE 4P allowances; or (3) A designated dollar amount as requested by the participant on DE 4P.

2014 and 2013 withholding tables can be found at Rates_and_Withholding.htm#CAWithh oldingSchedules

1.00%

Colorado (as of 01/03/2013)

Agency suggests using

supplemental wage rate for bonuses of 4.63%

Minimum Dollar Amount

Comments

Authority with Hyperlink

Other Authority

$10

Periodic and non-

California Revenue &

periodic payments are treated as wages.

Tax Code ?18662 df_pub_ctr/de231p.pdf

Voters approved Proposition 30 to increase personal income tax rates for individuals earning over $250,000 for taxable years beginning after 2011 and before 2019. Temporary 10.3%, 11.3%, and 12.3% personal income tax brackets are created for individuals earning over $250,000, $300,000, and $500,000.

df_pub_ctr/de4p.pdf

See 2014 and 2013 tables at ayroll_Taxes/Rates_and _Withholding.htm#CAWi thholdingSchedules .

Totally voluntary withholding. Colorado DOR email received 6/22/2007 suggests using the flat tax rate (currently 4.63% for 2013-2011) in the context of voluntary requests to withhold. Withholding is not required because the first $20,000 of taxable

Withholding tables change every 2 years. New tables released for 2013 at /cs/Satellite?blobcol=url data&blobheader=applic ation%2Fpdf&blobkey=i d&blobtable=MungoBlob s&blobwhere=12518441 68748&ssbinary=true

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

Minimum Dollar Amount

Comments

pension, IRA or other retirement income is not subject to tax for individuals age 55 or older ($24,000 if age 65 or older) if not from a premature distribution. If the pension organization agrees to withhold on pensions, an individual may request Colorado tax be withheld. Payer files same forms as for withholding on wages. Round withholding to nearest dollar.

Authority with Hyperlink

Other Authority

Connecticut (as of 08/14/2013)

The request to withhold and deduct Connecticut income tax is to be made in a specific whole dollar amount on

CT-W-4P 3withholding/ct-w4p.pdf

Delaware (as of 04/03/2013)

Delaware recommends the use of a percentage method of withholding rather than the wage tax tables although the tax tables are allowed. If a percentage method of withholding is used, it is recommended that the percent withheld not be less than 5%. If wage tables are used, the W-4P may be required to determine correct allowances for accessing withholding

5.00%

$10 minimum request to withhold

Rounded to nearest $

See IP 2013(8) at drs/publications/pubsip/ 2013/ip2013-8.pdf

Connecticut Agencies Regs. ?12-705(b)-3

Delaware w/h is mandatory on ERD or on all distributions where payment made to outside the U.S. where federal w/h is mandatory. Under Federal statute, withholding on certain retirement pay is

. gov/services/wit_folder/s ection12.shtml

State of Delaware "Employer's Guide, Section 12: Deferred Compensation"

Effective January 1, 2014, the top personal income tax rate reduces to 6.6%, down from 6.75% in 2013. The top

State

Periodical

Calculation

Applies to periodical payments from QRPs, life insurance contracts, commercial annuities, and endowment contracts. QRPs include IRC '401(a), including '401(k), '403(a) and (b), and governmental '457

plans.

Nonperiodical

Calculation

Applies to nonperiodical payments such as lump sums from QRPs, life insurance contracts, commercial annuities, and endowment contracts, and to all taxable IRA distributions.

Minimum Percentage

Rate

tables. See wit_folder/section12.shtml

Current withholding tables can be found at wit_folder/section24.shtml

District of

Where withholding is required, it shall be

Columbia (as of at the highest District individual income

11/10/2013) tax rate which is in effect at the time of

distribution. As of the date of this notice,

the highest DC income tax rate is 8.95%.

See FR 230.

[Subsection (f) of D.C. Official Code ?

47-1812.08]

The Fiscal Year 2013 Budget Support Act of 2012, enacted June 22, 2012, effective after a 30-day congressional review period, made permanent the requirement to withhold on lump-sum distributions that are the payee's entire account balance if not made through a trustee-to-trustee transfer.

Minimum Dollar Amount

Comments

Authority with Hyperlink

Other Authority

required unless the recipient specifically elects not to have the tax withheld. Delaware has no such requirement, but State tax may be withheld from such payments if the recipient voluntarily requests State withholding. An annuitant, who has elected to have federal tax withheld, may either elect to have state tax withheld or elect not to have state tax withheld. An annuitant who has filed Federal Form W-4P may also request State Income Tax withholding.

rate is applicable to taxable income over $60,000. It was scheduled to decrease to the pre-2010 level of 5.95%, but was changed by legislative action. [DE HB 50 (2013)]

Current withholding tables can be found at . gov/services/wit_folder/s ection24.shtml

See FR 230 at e/499192

And see details at show.aspx/agency/otr/s ection/2/release/23108/y ear/2012

Cokala has received confirmation from the agency that the new withholding provisions will only attach to total account distributions. Where the resident payee

There are many forms of lump sum payments that could be considered a pay out of a payee's entire account balance if not made through a trustee-to-trustee transfer, including the cash out of an IRA CD, or the reversal of a traditional IRA contribution. Cokala has developed a list of queries on these matters and is in discussion with the agency on their

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