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Hi and welcome to Just Answer!Sorry for your situation. Because the payment is really small - the payer is correct - there is no withholding.Please be aware that your tax liability is determined not at the time you receive payments - but when you file your tax return - and will be based on your total income, filing status, deductions, etc. The purpose of withholding is to cover expected tax liability which will be determined only when you prepare your tax return.The first step is to estimate your total tax liability and marginal tax bracket.Then - for instance - if you are in 15% tax bracket - you will estimate your tax liability from these payments as $403.29 * 12 months * 15% = $726.If that will be your only tax liability - you may pay that amount by Apr 15, 2014 - as long as the amount due is less than $1000 - you are OK.If you have other income - for instance wages - you may increase your withholding from that income to cover that pension income.Or as you suggested - you may file form W4P and request a flat dollar amount withholding - in that example - $403.29 * 15% = $60.So far - above are possible options.
Ok, thank you for the information. Now I can figure out what I need to do.