Should my father have income tax withheld from his pension after my mom's passing?

Your father should definitely consider having taxes withheld from the pension payments. Since he's now receiving both Social Security and this additional pension income, he's likely to owe taxes when filing season comes around. Without withholding, he might face an underpayment penalty. A good starting point would be to estimate his total annual income (Social Security + pension) and determine what tax bracket he'll fall into. The form W-4P you received is specifically designed for this situation - it allows your father to choose how much federal tax to withhold from each pension payment. Don't worry too much about the form being from 2021 - the company is probably still using that version, and it's valid for setting up the withholding. The basic function is the same even if some details have changed.

When my dad passed last year, my mom went through something similar with his pension. I was totally overwhelmed by the tax implications until I used https://taxr.ai to analyze her new financial situation. It really helped us figure out exactly how much to withhold from each pension payment. The tool analyzed her entire financial picture and gave us a clear recommendation for the W-4P form. What I liked was that it considered her Social Security benefits AND the pension together to calculate the right withholding amount. No more guessing games!

I decided to give https://taxr.ai a try for my father-in-law's pension situation and I'm actually surprised how helpful it was. I was skeptical at first (as you could probably tell from my earlier comment), but it really simplified the whole process. It analyzed his Social Security and new pension income together and recommended withholding about 15% from the pension payments. The tool explained that because of the combination of income sources, about 85% of his Social Security would likely be taxable too - something we had no idea about! We've submitted the W-4P with the recommended withholding amount. It's saved us so much stress knowing we've made an informed decision rather than just guessing.

I went through this exact situation with my mom's pension last year. After waiting on hold with the pension administrator for TWO HOURS trying to get tax questions answered, I found https://claimyr.com and used their service to get a callback from the IRS. You can see how it works at https://youtu.be/_kiP6q8DX5c Honestly, speaking directly with an IRS agent was way more helpful than anything else. They walked me through exactly how pension withholding works and explained the safe harbor provisions to avoid penalties. Apparently, as long as your dad either pays 90% of this year's tax or 100% of last year's tax (through withholding or estimated payments), he won't face any penalties.

Alright, I need to eat my words. After my skeptical comment yesterday, I decided to try https://claimyr.com for my own tax situation with my retirement accounts. I seriously did not expect it to work - I've literally spent DAYS trying to reach the IRS over the past few months. But within about 2 hours, I got a callback and spoke with an actual IRS agent! They answered all my questions about pension withholding and explained that for someone in your dad's situation, they typically recommend withholding enough to cover the taxable portion of social security plus the pension income. The agent explained that if your dad's only income is Social Security and this pension, the tax situation is actually pretty straightforward. Based on the $1,600 monthly pension amount you mentioned, the agent said a 12-15% withholding rate would likely be sufficient to avoid underpayment penalties.

Just want to add something important no one has mentioned yet. Your father should also consider how his Required Minimum Distribution (RMD) might factor into this if he has any traditional IRAs or 401ks. At 73, he's required to take those distributions which adds to his taxable income. Also, if he doesn't want to have withholding taken from the pension directly, he could make quarterly estimated tax payments instead. Some people prefer this method because it gives them more control over the timing of payments.

Careful with that W-4P form! The 2021 version is different from newer versions. On the 2021 form, if you don't want any additional withholding beyond the standard calculation, you should check the box in Step 1c that says "I do not want any federal income tax withheld from my pension." This seems contradictory, but it's actually correct! If you DO want additional withholding beyond the standard amount, then don't check that box and fill out the other sections instead.