Effective January 1, 2023, the Internal Revenue Service is changing the documentation requirements relating to federal income tax withholding for annuity and life insurance contracts. To comply with these new requirements, F&G is changing the process for withdrawing funds from these contracts.
By way of background, when a customer withdraws funds from one of our contracts, they generally have the choice of electing out of federal tax withholding or specifying how much tax they want withheld. On our existing forms, this choice is made by checking a box or entering a withholding amount.
The IRS has issued new forms that must be used to make federal tax withholding choices: The IRS W-4P applies to periodic payments (annuitization payouts) and the IRS W-4R applies to all non-periodic payments (e.g., surrenders, partial withdrawals, systematic withdrawals, guaranteed minimum withdrawal benefits). The IRS now requires customers to use these forms for all withdrawals. We are no longer able to allow a customer to make their federal tax withholding choices on our forms. They must provide the applicable IRS Form W-4P or W-4R.
Accordingly, commencing January 1, 2023, F&G will notify customers when they request funds that they need to provide us with the new Form W-4P or W-4R if they wish to make a choice regarding federal tax withholding. These Forms will be available on our website and on the IRS website.
If a customer does not provide the applicable IRS Form, we will process the transaction request, but as required by law, we will withhold federal tax under the applicable default rules (e.g., we would withhold 10% of the taxable amount of a non-periodic payment).