Letter Regarding January Tax Withholding from TRS

Teacher Retirement System of Texas (TRS) annuitants recently received a letter dated January 14, 2022 detailing January annuity payments and the projected difference in IRS withholdings as compared to December 2021. The Texas Retired Teacher Association (TRTA) has heard from many retirees who are confused by the letter, as their deductions have changed dramatically relative to 2021.

TRS released a Frequently Asked Questions (FAQ) document related to the supplemental payment which addresses the tax deduction issue. The FAQ also clarifies that TRS will send another letter in February 2022 that may provide additional answers about the discrepancy.

From the TRS website:

How might the one-time supplemental payment affect my January annuity payment tax deductions?

  • Because you are receiving the one-time supplemental payment you may notice an increase in the income tax withholding on your January annuity payment. This increased tax withholding is likely a result of receiving two payments in the month of January. Income tax withholding for your annuity payment is based on your total monthly taxable income. So, if a retiree receives more income in a month, a higher rate of income tax withholding may apply. If you see a higher withholding amount for your January annuity payment, it is likely because receiving the supplemental payment in addition to your annuity payment increased your rate of withholding for the month of January. Your withholding rate will return to normal on your February payment. Lastly please note, the IRS released new annual tax withholding tables at the end of December that were applied to the January payments, so you may also notice those nominal adjustments to your withholding amount.
  • In February, TRS will send out a new letter with a comparative summary of the January and February annuity payments. This will show the changes in the IRS withholding for your February and future annuity payments in 2022.

How will TRS determine my tax withholding for the supplemental payment and where can I go to change my tax withholding?

  • TRS will withhold the annuitant’s preferred withholding as indicated on the most recent TRS Form 228A TRS has on file. However, if TRS does not have a Form 228A on file for an eligible annuitant, then TRS will apply the default withholding (married and claimed three withholding exemptions) to the one-time supplemental payment. You can update your income tax withholding preference by visiting MyTRS and selecting Modify Withholding Preference. If you do not have a MyTRS account, you may download, complete and mail Form 228A (pdf) to TRS. Depending on when they are received, withholding changes may not be adjusted in time for the supplemental payment.

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