Recipients of pensions use federal tax form W-4P to inform payers about the amount of federal income tax to withhold from their payment, according to TurboTax. Form W-4P is only used with delayed compensation from annuities, pensions and similar financial instruments.
Form W-4P is not filed with the taxes, indicates TurboTax. The pension recipient sends it to the payer to indicate the amount of withholding he wants. The payee has the choice of the amount he wants the payer to withhold. Some want nothing withheld, while others prefer to have an additional amount held from each check.
The U.S. Office of Personnel Management (OPM) withholds taxes from annuities it administers as if the payee is married and filing his taxes with three exemptions. However, the payee has the option of changing what the office withholds by filing a Form W-4P-A, explains the OPM. The office makes the changes once it receives the form and the recipient’s instructions. Although an annuity payee can elect to stop all withdrawals from the check, if his withholding and quarterly tax payments do not equal at least 90 percent of his tax liability for the year, he faces penalties from the Internal Revenue Service, warns the Office of Personnel Management. If recipients are unsure of the amount to have withheld, the OPM recommends connecting to the IRS withholding calculator.