$400/$800 Credit

[JG EA]

Is it your understnding that pension plans are now NOT withholding according to the new tables? Is this universal? I wonder why they ever were to do so if retirees were not to get the credit.

I have missunderstood this credit not warned my pension clients sufficiently and need to do so now unless all of the pension providers will stop using the withholding tables that take out less.

[Zee]

You might find this article helpful.

http://www.boston.com/news/nation/washington/articles/2009/05/14/irs_gives_pension_plans_fix_for_tax_credit_glitch/

[JG EA]

Thanks.

So, from that article it sounds like everyone will adjust their withholding for the retirees. So, I think that means we don't have to do anything. Is that your thought?

[Zee]

I'd guess most large pension providers are aware of the problem and will use the new tables. Smaller provider's might not.

Why not simply send a copy of the article to affected clients suggesting they check with their pension provider? That would satisfy the responsibility for helping client's keep abreast of new developments.

[JG EA]

Good idea. I will.

[Corduroy Frog]

Fixed Amount

Why not simply send a copy of the article to affected clients suggesting they check with their pension provider? That would satisfy the responsibility for helping client's keep abreast of new developments.

This is a good suggestion, but with almost ALL of my retirees who have taxable income, the withholding strategy cannot rest with how the provider uses whichever withholding table.

I tell my recipients that the withholding tables is going to decrement the amounts withheld EVERY YEAR. To combat this shortage, the client should give the provider a FIXED AMOUNT to add to the table withholding every pay period (usually a month).

A very typical situation is that the recipient has substantial other income in addition to his pension, and has no W-2 income. This means that the 1099-R affords the only opportunity to pay in their taxes without making quarterly estimates. Most people don't want to go to the trouble to contact their provider (especially if it involves having to deal with a government). But they will do this if the alternative is making quarterly payments.