Tax Type
Employer Income Tax Withholding
Description
Retirement plans; Withholding requirements
Topic
Withholding of Tax
Date Issued
12-12-1991
December 12, 1991
Re: Ruling Request: Income Tax Withholding
Retirement Plans
Dear*********************
This is in reply to your letter dated November 1, 1991, in which you request information regarding the Virginia withholding requirements on distributions from qualified retirement plans.
RULING
Effective January 1, 1992, payers of pensions and annuities must begin withholding Virginia income tax from all recipients who are Virginia residents and for whom they are withholding federal income tax. This is the result of legislation enacted by the 1991 Virginia General Assembly (Chapters 362 and 456), which generally conforms Virginia withholding requirements to federal withholding requirements.
Under prior Virginia law, recipients of pension and annuity payments could enter into voluntary agreements with their payers to have Virginia income tax withheld. Any such agreements in effect on January 1, 1992, shall continue in force unless terminated by either the payer or recipient. The federal election will become binding at the point that a voluntary withholding agreement is terminated.
Generally, when Virginia withholding is required, it is to be in the amounts specified in the Virginia withholding tables. However, when the recipient receives a nonperiodic payment and elects to have federal income tax withheld on the nonperiodic payment, Virginia income tax must be withheld using a flat 4 rate.
Payers of pensions, who withhold Virginia income tax on the pensions of their recipients, are subject to the same filing, payment and reconciliation requirements as employers withholding Virginia income tax on wage payments.
To further clarify this law change, I have enclosed a copy of Tax Bulletin 91-9 and the recently revised Virginia Employer Withholding Instructions.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5729E
Rulings of the Tax Commissioner