All articles 6 min read

Tax Withholding and Estimated Tax: Federal Employee Retirement Taxes (2025 IRS Guide)

This guide covers “Tax Withholding and Estimated Tax” within federal employee retirement taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 721 (2025), Tax Guide to U.S. Civil Service Retirement Benefits, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Tax Withholding and Estimated Tax

The CSRS or FERS annuity you receive is subject to federal income tax withholding, unless you choose not to have tax withheld. OPM will tell you how to make the choice. The choice for no withholding remains in effect until you change it. These withholding rules also apply to a disability annuity, whether received before or after minimum retirement age.

If you choose not to have tax withheld, or if you don’t have enough tax withheld, you may have to make estimated tax payments.

.You may owe a penalty if the total of your withheld tax and estimated tax doesn’t cover most of the tax shown on your return. Generally, you will owe the penalty for 2026 if the additional tax you must pay with your return is $1,000 or more and more than 10% of the tax to be shown on your 2026 return. For more information, including exceptions to the penalty, see Pub. 505, Tax Withholding and Estimated Tax. .

Form CSA 1099-R.

Form CSA 1099-R is mailed to you by OPM each year. It will show any tax you had withheld. Attach a copy of Form CSA 1099-R to your tax return if any federal income tax was withheld.

You can also view and download your Form CSA 1099-R by visiting the OPM website at
servicesonline.opm.gov. To log in, you will need your retirement CSA claim number, your social security number (SSN), and your password.

Choosing no withholding on payments outside the United States.

The choice for no withholding generally can’t be made for annuity payments to be delivered outside the United States and its territories.

To choose no withholding if you are a U.S. citizen or resident alien, you must provide OPM with your home address in the United States or its territories. Otherwise, OPM has to withhold tax. For example, OPM must withhold if you provide aU.S. address for a nominee, trustee, or agent (such as a bank) to whom the benefits are to be delivered, but you don’t provide your own U.S. home address. Also, even if you provide a U.S. home address, any election of no withholding is not valid if your payment instructions provide that the payment is to be made to a financial institution or other person located outside the United States or its territories.

If you don’t provide a home address in the United States or its territories, you can choose not to have tax withheld only if you certify to OPM that you aren’t a U.S. citizen, a U.S. resident alien, or someone who left the United States to avoid tax. But if you so certify, you may be subject to the 30% flat (or lower treaty) rate withholding that applies to nonresident aliens. For details, see Pub. 519, U.S. Tax Guide for Aliens.

Withholding certificate.

If you give OPM a Form W-4P for withholding on periodic pension or annuity payments, or Form W-4R for withholding on nonperiodic payments, you can choose not to have tax withheld or you can choose to have tax withheld. You can’t choose to have no tax withheld from eligible rollover distributions. The amount of federal income tax withheld depends on which form you need to complete. See the instructions for each form for more information. If you don’t complete Form W-4P, then for a payee who received a first periodic payment in 2025, OPM must withhold as if you were a single filer who made no entries in Step 2, Step 3, and Step 4 of Form W-4P. For the default 2025 withholding for a payee who first received a periodic payment before 2025, see Payee fails to furnish Form W-4P or provides an incorrect SSN on Form W-4P in Pub. 15-T. If you don’t complete Form W-4R, then for a nonperiodic payment, OPM must withhold federal income tax at 10%. For an eligible rollover distribution, the default withholding rate is 20%.

To change the amount of withholding or stop withholding, go to the OPM website at servicesonline.opm.gov. You will need your retirement CSA or CSF claim number and password. If you do not have a password, call or write OPM’s Retirement Information Office.

You can also change the amount of tax withholding or stop withholding by calling OPM’s Retirement Information Office at 1-888-767-6738. No special form is needed. You will need your retirement CSA or CSF claim number and your SSN when you call. If you have TTY/TDD equipment, call 711.

Withholding from certain lump-sum payments.

If you leave the federal government before becoming eligible to retire and you apply for a refund of your CSRS or FERS contributions, or you die without leaving a survivor eligible for an annuity, you or your beneficiary will receive a distribution of your contributions to the retirement plan plus any interest payable. Tax will be withheld at a 20% rate on the interest distributed. However, tax will not be withheld if you have OPM transfer (roll over) the interest directly to your traditional IRA or other qualified plan. If you have OPM transfer (roll over) the interest directly to a Roth IRA, the entire amount will be taxed in the current year. Because no income tax will be withheld at the time of the transfer, you may want to increase your withholding or pay estimated taxes. See Rollover Rules under Part II, later. If you receive only your contributions, no tax will be withheld.

Withholding from TSP payments.

Generally, a distribution that you receive from the TSP is subject to federal income tax withholding. The amount withheld is:

  • 20% if the distribution is an eligible rollover distribution;

  • 10% if it is a nonperiodic distribution other than an eligible rollover distribution; or

  • Determined using the instructions and tables provided in Pub. 15-T, based on information you provide on Form W-4P, if it is a periodic distribution.


However, you can usually choose not to have tax withheld from TSP payments other than eligible rollover distributions. By January 31 after the end of the year in which you receive a distribution, the TSP will issue Form 1099-R showing the total distributions you received in the prior year and the amount of tax withheld.

For a detailed discussion of withholding on distributions from the TSP, see the TSP publications Tax Rules about TSP Payments, and Distributions. Both these publications are available on the TSP website at TSP.gov/forms.

Estimated tax.

Generally, you must make estimated tax payments for 2026 if you expect to owe at least $1,000 in tax for 2026 (after subtracting your withholding and credits) and you expect your withholding and your credits to be less than the smaller of:

  • 90% of the tax to be shown on your income tax return for 2026, or

  • 100% of the tax shown on your 2025 income tax return (110% of that amount if the adjusted gross income shown on the return was more than $150,000 ($75,000 if your filing status for 2026 will be married filing separately)). The return must cover all 12 months.

You don’t have to pay estimated tax for 2026 if you were a U.S. citizen or resident alien for all of 2025 and you had no tax liability for the full 12-month 2025 tax year.

Pub. 505 and Form 1040-ES contain information that you can use to help you figure your estimated tax payments.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

Back to all articles