Withholding Income Taxes on IRAs, Annuities, and Compensation Plans

Oregon's requirements to withhold income taxes from IRAs, annuities, and deferred compensation plans will be consistent with the provisions of Internal Revenue Code (IRC) Section 3405 except that mandatory backup withholding of income taxes will not be required for a rollover from one qualifying plan to another qualifying plan under circumstances that would require such withholding of income taxes for federal purposes.

Example: On July 1, 2016, Fred Smith removed his IRA account from Bank A and two days later placed it with Bank B. Since Fred didn't have Bank A do a direct transfer of funds to a new IRA account with Bank B, IRC 3405 requires Bank A to withhold 20 percent in payment of any income taxes that may be due if Fred failed to roll the funds into a new qualifying plan (which would cause the funds to be includible in taxable income). For Oregon, Bank A is not required to withhold income taxes.

[Publications: Contact the Oregon Department of Revenue to learn how to obtain a copy of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360(2) and ORS 183.355(1)(b).]