February 18, 1992
TO: PENSION COMMITTEE NO. 10-92
RE: VIRGINIA BEGINS WITHHOLDING ON CERTAIN PENSION DISTRIBUTIONS
__________________________________________________________
In 1991, Virginia enacted legislation, SB-765 and HB-1734,
attached, which amends Virginia withholding requirements relating
to pensions, annuities and certain deferred income to conform to
the federal withholding requirements. The new requirements
became effective January 1, 1992. A copy of Virginia Tax
Bulletin 91-9, explaining these changes, is also attached.
Previously, Virginia withholding on pension and annuity
distributions had been totally voluntary. Under Internal Revenue
Code section 3045, however, federal withholding is required on
periodic pension and annuity payments unless the recipient makes
a "no withholding" election on Internal Revenue Service Form
W-4P.
Effective January 1, 1992, payers of pensions and annuities
were required to withhold Virginia income tax for all Virginia
residents subject to federal withholding on those payments. Any
voluntary Virginia withholding agreement between a payer and a
recipient in effect on that date will continue in effect unless
terminated by either party. Upon termination of the voluntary
agreement, the new withholding requirements will take effect.
Payers must use the standard Virginia withholding tables to
determine the amounts required to be withheld on periodic pension
and annuity payments. In order to determine the proper number of
withholding exemptions, each Virginia resident receiving payments
and any person receiving payments from a Virginia payer are
required to provide the payer with a completed Virginia Form VA-
4P, Withholding Exemption Certificate for Recipients of Pension
and Annuity Benefits. If no such form is filed, withholding must
be applied as if the recipient had no exemptions.
We will keep you informed of further developments.
David J. Mangefrida Jr.
Assistant Counsel - Tax
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