Is federal income tax withholding required on deferred compensation payments?

Yes. If the distribution is an eligible rollover distribution, 20% withholding is required, unless the distributee chooses to make a direct rollover. For distributions that are not eligible for rollover, nonperiodic distributions are subject to withholding at a flat rate of 10%, while the withholding on periodic distributions is the amount that would be withheld if the distribution were wages paid to an employee for the appropriate payroll period. With regard to distributions that are not eligible to be rolled over, the participant may make an election to waive withholding. This election is not available for eligible rollover distributions. Considering a Tax Professional? For no obligation free consultation contact us today!
ABA Tax Accounting
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