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Withholding for Annuities and Pensions
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Beginning with payments made on or after January 1, 2022, Minnesota requires withholding on annuity and pension payments unless the recipient asks you not to withhold.
Recipients should use Form W-4MNP, Minnesota Withholding Certificate for Pension and Annuity Payments, to set the rate or amount of withholding or opt out of withholding on these payments.
If you are a recipient, use Form W-4MNP to set your withholding to any rate or amount, including none. If you do not opt out of withholding or provide a withholding rate or amount, your payer must withhold at the default rate of 6.25%.
If you are a payer, do not change or set the withholding rate without contacting the recipient to complete a Form W-4MNP (with either revised date 8/15/23 or 1/24). Do not automatically set the withholding rate to 6.25% without first contacting your recipient to complete Form W-4MNP. If they do not respond, you must withhold at the default rate of 6.25%.
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Federal Form W-4P will not determine allowances for Minnesota withholding. Recipients completing federal Form W-4P should complete Minnesota Form W-4MNP to determine the appropriate amount of Minnesota withholding.
Distributions that require Form W-4MNP include, but are not limited to:
- Payments or distributions from an employee deferred compensation plan (such as a 401(k))
- An individual retirement plan (IRA)
- Commercial annuities
Certain nontaxable distributions do not require Form W-4MNP. These include:
- Designated Roth account distributions
- Roth IRA distributions
- Qualified charitable distributions (QCDs)
Recipients complete Form W-4MNP before they begin receiving payments or distributions from an employee deferred compensation plan such as a 401(k), IRA, or commercial annuity. They should also complete Form W-4MNP if their personal or financial situation changes.
If recipients request more than one nonperiodic distribution from your institution, and you as a payer already have a Form W-4MNP on file, confirm with them whether they would like to use their previous election. If they choose to change their election, they must complete a new Form W-4MNP.
You must have a Minnesota Tax ID Number. If you do not have one, you can register for one online or by phone.
You must also have an active withholding tax account. Log in to our e-Services system to add one.
Once you have a Minnesota ID number and withholding tax account:
1. Have the recipient complete and send Form W-4MNP.
2. Set the withholding as directed by the recipient on their Form W-4MNP.
3. If the recipient does not return Form W-4MNP, you must set the withholding at the default rate of 6.25%. Do not change an existing withholding arrangement unless the recipient instructed you to do so or they do not respond to your request to complete Form W-4MNP.
4. Send federal Form 1099-R to the Minnesota Department of Revenue by January 31 each year.
Before 2022, Minnesota did not require withholding on annuity and pension payments. You may need to reach out to current recipients about the new requirement.
If, before 2022:
- You provided the option to withhold Minnesota income tax on distributions, you may continue following the recipient’s previous election. If they chose to have tax withheld, you may use the allowances they determined on a previous withholding allowance certificate. Do not change an existing withholding arrangement without contacting the recipient to obtain their approval or instructions using Form W-4MNP.
- You did not provide the option to withhold Minnesota income tax on distributions, you must ask recipients to complete Form W-4MNP to either set the withholding rate or amount or opt out of withholding on payments. If a recipient does not complete Form W-4MNP, you must withhold Minnesota tax at the default rate of 6.25%. Continue withholding at that rate until they provide you a completed Form W-4MNP.
