EQUAL PAYMENT PERIOD
Once you start receiving pre-59½ periodic payments, these payments must continue to be made until the later of the following:
1. The fifth anniversary of the first payment; or
2. You attain age 59½ (this occurs six months after your 59th birthday).
No contributions – During the equal payment period, there can be no additions to the IRA from which the pre-59½ periodic payments are being made
other than account earnings. Contributions, rollovers, direct transfers and direct rollovers into the IRA cannot be made.
No distributions – During the equal payment period, there can be no distributions from the IRA from which the pre-59½ periodic payments are being
made other than the pre-59½ periodic payments. Except as noted in the next paragraph, withdrawals, direct transfers and direct rollovers out of the IRA
cannot be made, and the pre-59½ periodic payments cannot be rolled over to another IRA.
Permitted rollover or transfer – All of the funds in an IRA making pre-59½ periodic payments can be rolled over or direct transferred to a newly
established IRA. The pre-59½ periodic payments remain the same and they must be distributed from the IRA to which the assets were moved. The new
IRA can be either a traditional IRA or a Roth IRA.
Result of a change during the equal payment period – You would be subject to the 10% early distribution tax on all taxable amounts received before
age 59½ if:
• Funds are added to or removed from the IRA making the pre-59½ periodic payments (other than the pre-59½ periodic payments themselves); or
• There is a change in the pre-59½ periodic payments (other than a change under the change to RMD method rule).
NOTE: YOU WOULD NOT BE SUBJECT TO THE 10% EARLY DISTRIBUTION TAX IF YOU CHANGE PAYMENTS AFTER YOU BECOME DISABLED.
STARTING PAYMENTS
We use the annuity method to compute a new series of pre-59½ periodic payments because this method results in the highest possible payment amount.
If you want to receive less than this amount, then you should move some of the funds from the IRA that will make the payments to a different IRA. Unlike
the IRA making the payments, this second IRA is not restricted from receiving contributions or making distributions.
1. Determine the date of the first payment: ________________
2. Determine your age on this date: ________________
3. Current value of the IRA: $_______________
(Adjust for expected changes
before payments start.)
4. Obtain the annuity factor: ________________
5. Multiply line 3 by line 4 to get the annual payment* $_______________
Stop here if you want this payment amount.
Continue if you want less:
6. Desired annual payment:* $_______________
7. Divide line 6 by line 5: ________________
8. Multiply line 3 by line 7: $_______________
Leave the amount on line 8 in the IRA that will be making the pre-59½ periodic payments, and use a direct transfer to move the rest of the funds in this
IRA to a second IRA.
* Divide the annual payment by the number of payments each year. The answer is the periodic payment, even if payments start in the middle of the year.
PERIODIC PAYMENTS BEFORE AGE 59½
Basic Information About Withholding From Pensions and Annuities. Generally, federal income tax withholding applies to the taxable part of payments made from pension,
profit sharing, stock bonus, annuity, and certain deferred compensation plans; from IRAs; and from commercial annuities.
Caution: There may be penalties for not paying enough tax during the year, through either withholding or estimated tax payments. New retirees should see Publication 505,
Tax Withholding and Estimated Tax. It explains the estimated tax requirements and penalties in detail. You may be able to avoid quarterly estimated tax payments by having
enough tax withheld from your IRA using form W-4P.
Purpose of Form W-4P. Unless you elect otherwise, 10 percent federal income tax will be withheld from payments from individual retirement accounts (IRAs). You can use
Form W-4P (or a substitute form, such as this form), provided by the trustee or custodian, to instruct your trustee or custodian to withhold no tax from your IRA payments
or to withhold more than 10 percent. This substitute form should be used only for withdrawals from IRAs that are payable upon demand.
Nonperiodic Payments. Payments made from IRAs that are payable upon demand are treated as nonperiodic payments for federal income tax purposes. Generally, nonperiodic
payments must have at least 10 percent income tax withheld.
Your election will remain in effect for any subsequent withdrawal unless you change or revoke it.
Payments Delivered Outside of the U.S. A U.S. citizen or resident alien may not waive withholding on any withdrawal delivered outside of the U.S. or its possessions.
Withdrawals by a nonresident alien generally are subject to a tax withholding rate of 30 percent. A reduced withholding rate may apply if there is a tax treaty between the
nonresident alien’s country of residence and the United States and if the nonresident alien submits Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United
States Tax Withholding, or satisfies the documentation requirements as provided under federal regulations. The Form W-8BEN must contain the foreign person’s taxpayer
identification number.
For more information, Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, and Publication 519, U.S. Tax Guide for Aliens, are available on the IRS
website at www.irs.gov or by calling 1-800-TAX-FORM.
Revoking the Exemption From Withholding. If you want to revoke your previously filed exemption from withholding, file another Form W-4P with the trustee or custodian
and check the appropriate box on that form.
Statement of Income Tax Withheld From Your IRA. By January 31 of next year, your trustee or custodian will provide a statement to you and to the IRS showing the total
amount of your IRA distributions and the total federal income tax withheld during the year. Copies of Form W-4P will not be sent to the IRS by the trustee or custodian.
WITHHOLDING NOTICE INFORMATION (Form W-4P/OMB No. 1545-0074)
