Subject: Easy tax fix Comment: I think I have a simple way to boost the economy without a tax cut. I retired from Raytheon in August 2003. I elected to take my pension in 60 equal payments starting January 2004. When I filed my retirement paperwork I elected to claim married with 2 dependents on my W-4P but when I calculated my 2004 taxes I owed about $100. When I called my pension administrator to change my withholding to married with 1 dependant I was told that a mistake was made when my pension was started and that they would have to withhold 20% of my taxable pension payment because of an IRS regulation. Under this scenario I will overpay my taxes by about $5000 in 2005. Even though I’ll get this over- payment back when I file, I’ll be unable to spend it throughout the year. This didn’t seem right to me so I searched the IRS website for any reference to pension withholding. I found a reference in the form W-4P (2005) top of page 4 which I’ll quote here. “Eligible rollover distribution – 20% withholding. Distributions you receive from qualified pension or annuity plans (for example 401(k) pension plans, IRA, and section 457 (b) plans maintained by a government employer) or tax-sheltered annuities that are eligible to be rolled over tax free to an IRA or qualified plan are subject to a flat 20% withholding rate. The 20% withholding rate is required, and you cannot choose not to have income tax withheld from eligible rollover distributions. If this rule or regulation were changed to allow me to adjust my withholding rate I would have an additional $400 each month to put into the economy. Since I’m going to get all of the excess back when I file my taxes I don’t see the point of the US government taking this money out of the economy. Warren Ferrell 810 Southwestern Run #18 Poland, Ohio 44514-3676 Warrenf2@yahoo.com |