The federal government and the State of California (for residents only) require that the Department withhold taxes unless the pensioner or beneficiary completes an Income Tax Withholding Form and requests that no taxes be withheld.

If a completed form is not on file with our office, the Department must deduct taxes as if the pensioner were a married individual with three withholding allowances. You may change your withholding status at any time by submitting another form.

Pensioners and beneficiaries who are U.S. citizens residing outside the United States are required by the federal government to pay monthly federal income taxes as if they were married and have three withholding allowances. This is the default amount that is automatically withheld from all taxable pensions, unless the benefit recipient specifies a higher amount.

If you wish to change your tax withholding, download the Income Tax Withholding Form. Complete the information, including tax-withholding instructions, for federal and California State taxes. You can elect to have your federal and California taxes withheld in one of three ways:

• Option 1: Withhold no taxes.
• Option 2:
  • Federal taxes: Withhold taxes according to the Federal income tax tables.
    • Please designate your withholding status: “married” or “single,” and number of allowances. If the number of allowances is left blank, we will enter your “Total Number of Allowances” as zero.
    • You may also list a dollar amount to be withheld in addition to the tax table.
  • California taxes: Withhold 10% of your federal tax rate.
• Option 3: Withhold a designated monthly dollar amount. The dollar amount you select will not change until you file a new withholding form with the Department.

Mail your completed form to the Department. Contact DROP/Retired Member Services with questions.

Note: For California state tax purposes, the address you have on file with Pensions determines your state tax withholdings. A Tax Form, 1099-R will be issued reflecting your California pension tax liability.