New IRS Rules for Retirement Account Withdrawals
Effective January 1, 2023
The IRS changed the rules for federal income tax withholding from retirement account withdrawals.
Starting in 2023, when making a withdrawal from your American Century Investments retirement account, you’ll need to consult the IRS Form W-4R for guidance in determining the federal tax withholding rate that is appropriate for your situation.
Because most withdrawals that are not rolled over to another retirement plan result in taxable income, the IRS has set default withholding rates to help you meet your tax obligations. However, the default rates may not be appropriate for your tax situation. Please consult with your tax advisor to determine what is right for your specific situation.
Withdrawal Forms
IRA Forms
Retirement Plan Forms
Brokerage Forms
Default Withholding Rates
For traditional, Rollover, SEP, SARSEP and SIMPLE IRAs, the default withholding rate is 10%. For Qualified Retirement Plans, 403(b)s and 457(s), the default rate is 10% for withdrawals that are not eligible for rollover to another retirement plan, and 20% for withdrawals that are rollover eligible but are not directly rolled over.
Requests to withhold at a rate other than the default or to opt out that do not contain a W-4R election will be rejected if received after January 1.
I have a withholding election on file for automatic withdrawals. Will that change?
Current withholding elections for automatic withdrawal plans will remain in effect. A W-4R election is only needed if you wish to make a change.
Does this apply to my Roth IRA?
Roth IRAs are not subject to required withholding, so the changes do not apply.
How do I request a retirement account withdrawal?
Online: Log in to your American Century account to request an online withdrawal. Traditional and Rollover IRA account owners must request withdrawals at the default withholding rate. SEP, SARSEP and SIMPLE account owners may choose 0%-100% withholding.
Note: Not all workplace retirement plans allow online withdrawals.
By mail: Provide your W-4R election using our updated withdrawal forms. To avoid delays, please do not send handwritten instructions or use old forms that do not mention the W-4R language.
By phone: Consult IRS Form W-4R to determine which withholding rate is appropriate for your situation, and then call us to request your withdrawal.
Note: Not all workplace retirement plans allow phone withdrawals.
What if I don’t want withholding? Or want a different percent?
Online: SEP, SARSEP and SIMPLE IRA account owners may log in and choose 0%-100% withholding. Currently, Traditional and Rollover IRA account owners cannot make an online election to withhold at a rate other than the default.
By mail: If you don’t want the default withholding rate, complete the appropriate withdrawal form with your W-4R election and mail it to us.
By phone: Consult IRS Form W-4R to determine which withholding rate is appropriate for your situation, and then call us to request your withdrawal.
Note: Not all workplace retirement plans allow phone withdrawals.
Can I request a specific dollar amount for my withholding?
Dollar amounts can no longer be requested for withholding—only whole percentages from 0% to 100% are allowed.
Are there any changes to state withholding rules?
The rules apply to federal income tax withholding. There are no changes to mandatory state withholding.
What happens to the withholding amount?
Any amount withheld is sent to the IRS as a credit toward your federal income taxes due for the calendar year in which the withdrawal is requested.
Questions?
Give us a call.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.