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APA Comments on Draft 2021 Form W-4P on Retirement Withholding

BY: Alice P. Jacobsohn, Esq. | 10/09/20

The APA Government Relations Task Force offered the IRS comments on the draft 2021 Form W-4P, Withholding Certificate for Retirement or Annuity Payments. The U.S. Department of the Treasury contacted APA asking for feedback on the changes included in the draft form. On September 28, the IRS announced, in response to comments received on the draft form, that it will delay the redesign.

Tax forms often include worksheets to identify data elements and instructions on the form itself. The IRS also may issue a publication with separate instructions. Ensuring that the terms and steps are consistent in all related documents is extremely important to ensuring accuracy. The APA identified inconsistent elements in the draft 2021 Form W-4P, including the amounts to withhold figured in the form overview are listed as A, B, and C, which do not correspond to the payer’s worksheet, which uses Steps 1-4.

In general, the language addressing multiple jobs and sources of retirement and annuity payments is unclear. For example, in Steps 3-5 more detail is needed on completing the form when the payee has multiple sources of retirement payments and one source is greater than other sources.

The APA also asked the IRS to change how it approaches no withholding. APA members would prefer a check box on Form W-4P, APA said. “Leaving a ‘write-in’ method to the imagination of software developers creates inconsistency and confusion for employees and payroll professionals.”

In discussions with the Treasury Department in September, APA was asked about electronic and paper versions of the Form W-4P, whether the agency should design two different forms for periodic and non-periodic payments, and the write-in of no withholding.

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Alice P. Jacobsohn, Esq., is Director of Government Relations for the APA.