Withholding Taxes for Retirees

Last spring I learned that the tax tables for withholding are different for pensioners. Here is some news about withholding taxes from the Georgia TRS website.

• IRS Issues New Tax Withholding Tables
  The Internal Revenue Service (IRS) has issued new tax withholding tables in conjunction with the U.S. economic stimulus plan’s new federal “earned income” tax credit for working Americans – the Making Work Pay credit. Although pension benefits are not considered “earned income”, the IRS has instructed TRS and other pension plans to use the new tables to determine how much to withhold from your monthly benefit payment. These new tables were effective April 1, 2009, and may reduce the amount of income tax withheld from your monthly pension benefit.
  For those retirees having federal taxes withheld based on marital status and the number of exemptions claimed (as opposed to a fixed withholding amount), the effect will be a decrease in the tax withheld and a corresponding increase in your monthly benefit payment. You may want to submit a revised W-4P and/or consult with a tax advisor to ensure enough withholding is withheld from your pension benefit. If you wish to update your tax withholding, please do so online via your TRS account (click on the Account Login button above).
  For additional information and assistance, visit the IRS Web site, http://www.irs.gov/, and use the Withholding Calculator; review the Tax Tables found in Publication 15-T; or refer to IRS Publication 919 (How Do I Adjust My Tax Withholding?). You can also contact the IRS at 800-829-1040 for more information.

I hope you find this information helpful.