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February 16, 2009

Periodic payment (periodic distribution)



Periodic payments are made in installments at regular intervals over a period of more than 1
year. They may be paid annually, quarterly, monthly, etc. ( Form W4-P)

The Code defines a periodic payment as “designated distribution which is an annuity or similar periodic payment.

Periodic payments include the following:

  • Cash withdrawals.
  • Distributions of current earnings (dividends) on investments.
  • Loans treated as distributions
  • The value of annuity contracts transferred without full and adequate consideration

Referring Cite

IRC § 3405(e)(2), IRS Form W4-P

Additional Helpful Information

The withholding rate for a periodic payment is determined in the same manner that withholding from wages is determinedIRC § 3405(a)(1)

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