J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

26.9 Withholding on Retirement Distributions

Retirement distributions are subject to withholding taxes, but you may choose to avoid withholdings. The method of avoiding withholding varies with the type of payment.

Periodic payments.

If you receive periodic payments in installments over more than one year, such as from a pension or an annuity, withholding is required unless you elect to avoid withholding on Form W-4P, or on a substitute form furnished by the payer. If you are a U.S. citizen or resident alien, withholding may not be avoided on pensions or other distributions paid outside the U.S. or U.S. possessions. Payment must be to your home address within the U.S. (or in a U.S. possession) to avoid withholding.

Unless you tell the payer otherwise, wage withholding tables are used to figure withholdings on periodic payments as if you were married and claiming three withholding exemptions. Withholding allowances may be claimed on Form W-4P for estimated itemized deductions, tax credits and adjustments to income such as alimony payments, student loan interest, and deductible IRA contributions.

You may also request that the payer withhold a specific amount of additional tax for each payment.

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Planning Reminder

Direct Rollover From Employer Plan Avoids Withholding

Your employer must withhold 20% from a distribution paid to you if the distribution was eligible ...