Would you like to get lump-sum pension?

Personal Allowances Worksheet:

Nobody wants to owe a lot of money or have the IRS come knocking on your door. The personal allowances worksheet will give you step by step instructions on exactly how to file out a W-4 Tax Form.

The W-4 Form starts at A and ends with H. You have eight questions to consider. You can see the W-4 Form online through the IRS provided PDF file.

Lump-Sum Pension Payout:

If you receive a lump-sum payment from your retirement plan, the plan supervisor is required to withhold 10% for federal income taxes.

If you plan to spin the funds over into an IRA or another tax-free pension plan yourself, the tax withholding requirement is 20%. This applies even if you have retired, quit or are laid off. If 20% is withheld, you would have to prepay tax you might not even owe – especially if you spin over the distribution within 60 days.

So, if you handle the spin over yourself by taking the check and depositing it in IRA within 60 days:

  • Your plan supervisor will withhold 20% of your distribution.
  • Unless you include the amount which is equal to the 20% withholding from another source, you will not have sufficient to put the full payment into an IRA.
  • The IRS will tax and possibly penalize any part of the gross distribution that is not spinned into an IRA within 60 days.


To shun having 20% withheld from your distribution, you should go for a direct spin over by following:

  1. Inform your employer that you want to roll the funds over directly to another plan or IRA.
  2. Give your employer all the information about the account that is going to receive the rollover funds.
  3. Your employer will transfer the funds directly to the other account without withholding any taxes.

If done in this way, the transaction will be tax-free to you completely.

Tips and Withholding:

All the tips you receive are taxable income subject to withholding. If you receive $20 or more per month in tips, you should report that income to your employer.

June 29 2011 02:14 pm | W4 Assistance and W4 tax Form

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