Question about federal tax withholding for pensions in the US.
I've decided to dig into a pension and they require me to fill out a form W4P for federal tax withholding. Our other income is from multiple sources and it's very "lumpy" and hard to predict over a one year time frame: I haven't the faintest idea how to answer the income question with any level of fidelity.
Currently I only pay quarterly estimated taxes, have no withholdings, and I reconcile all of that at the end of the year.
I can randomly make a number to put in the W4P but, chances are, it's going to be off by a factor of 2 or 3 by the end of the year.
- As long as I pay estimated taxes without underpaying: does it actually matter what's in the W4P ?
- What happens if I just set the extra income in the W4P to zero (even if its not)?
- Are there any negative consequences to have a "wrong" W4P other than a potential underpayment penalty?
- Can I just chose not to have any taxes withheld and handle all of this through my quarterly estimated payments ?