Notice 2018-5 and Notice 2018-72

provided that notwithstanding the preamble to the 2017 regulations, withholding agents may apply the transition rules described in Notice 2010-46, Part III, for payments made in 2018, 2019, and 2020. This Notice provides that withholding agents may also apply the transition rules described in Notice 2010-46, Part III, for payments made in 2021 and 2022.

VII. TAXPAYER RELIANCE

Before the promulgation of the amendments to the section 871(m) regulations and the 2017 QI Agreement, taxpayers may rely on the provisions of this Notice regarding the proposed amendments described in sections III and V. Withholding agents may rely on the simplified standard for determining whether transactions are combined transactions as described in section IV and may apply the QSL transition rules described in section VI.

VIII. DRAFTING INFORMATION

The principal authors of this Notice are Karen Walny and Peter Merkel of the Office of Associate Chief Counsel (International). For further information regarding this Notice, contact Karen Walny or Peter Merkel at (202) 317-6938 (not a toll-free number).

Bulletin No. 2020–3 329 January 13, 2020

and Jobs Act, Pub. L. 115-97 (TCJA) to provide that the withholding rate for periodic payments when no withholding certificate has been furnished “shall be determined under rules prescribed by the Secretary.” Under the law in effect before 2018, § 3405(a)(4) provided that, in the case of a payee entitled to periodic payments with respect to which a withholding certificate had not been furnished, the amount to be withheld from each such payment “shall be determined by treating the payee as a married individual claiming 3 withholding exemptions.” Temporary Treasury Regulations issued under § 3405 (as in effect before 2018) continue to provide that, if no withholding certificate has been furnished with respect to periodic payments under § 3405(a), then the payor must base withholding on the rates for a married person claiming three withholding allowances. See Temp. Treas. Reg. § 35.3405-1T, Q&As A-10, B-3, B-4.

Following enactment of TCJA, the Treasury Department and the IRS issued guidance to address changes made by TCJA to withholding rules under §§ 3401, 3402, and 3405. See Notice 2018-14, 2018-7 I.R.B. 353, and Notice 2018-92, 2018-51 I.R.B. 1038. With respect to § 3405(a), section V of Notice 2018-14 provided that, for 2018, the default rate of withholding would parallel the rules for prior years and would be based on treating the payee as a married individual claiming three withholding allowances. Similarly, section 10 of Notice 2018-92 provided that, for 2019, the default rate of withholding under § 3405(a)(4) would parallel the rules for prior years, and would be based on treating the payee as a married individual claiming three withholding allowances.

III. 2020 FORM W-4P AND RELATED TABLES AND COMPUTATIONAL PROCEDURES FOR WITHHOLDING UNDER SECTION 3405(a)

The information requested on the 2020 Form W-4P for periodic payments (other than the no-withholding election on Line

Interim Guidance on Income Tax Withholding from Retirement and Annuity Distributions