Updated October 7, 2026. Quick answer: Yes, unless you opt out of the 3%. Form AR4P says the payer “must withhold at a flat 3% rate from nonperiodic payments”, and on a payment from a 401(k) that could be rolled over the flat 5% is required: “you cannot choose not to have income tax withheld”.
Drawing a pension? Whether the state withholds tax from it, from its own documents: Arkansas tax withholding on pension payments.
Arkansas withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Yes for a payment to you, unless you choose no withholding; the 5% on an eligible rollover distribution cannot be waived |
| Rate or amount | 3% flat on one-time (nonperiodic) payments, including an IRA payment on demand; 5% flat on eligible rollover distributions |
| How to start or stop it | Form AR4P, given to the payer; line 4 asks for an additional amount |
| Direct rollover | No state withholding if the plan administrator sends the entire distribution in a direct rollover |
| Changed for 2026? | No change stated; the form read is dated December 2025 |
What the Arkansas documents say
The Department of Finance and Administration’s Form AR4P, the withholding certificate for pensions and annuity payments, splits a withdrawal by type. For a one-time payment it says the payer “must withhold at a flat 3% rate from nonperiodic payments” unless you choose not to have state income tax withheld, and it treats an IRA distribution payable on demand as nonperiodic.
Payments from an employer plan that could be rolled over tax free are different: the form says they are “subject to a flat 5% state withholding” rate, and the 5% is required, so “you cannot choose not to have income tax withheld” from them. The form tells you not to give it to the payer for these payments unless you want an additional amount withheld, which goes on line 4.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. Arkansas treats it as an eligible rollover distribution, so the flat 5% applies and cannot be waived: $2,500 (computed as $50,000 times 5%) for Arkansas. A $50,000 IRA withdrawal payable on demand is nonperiodic, so the flat 3% applies unless you opt out: $1,500 (computed as $50,000 times 3%).
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. Arkansas agrees on the state side: the form says “The payer will not withhold state income tax if the entire distribution” is transferred by the plan administrator in a direct rollover to a traditional IRA, a qualified pension plan, a governmental 457(b) plan or a tax-sheltered annuity.
What a mover should know
This page is about Arkansas as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The form read does not cite an Arkansas Code section, and it states no change for 2026.
Common mistakes
- Expecting to opt out of Arkansas withholding on a 401(k) payment paid to you; the form says the 5% cannot be waived.
- Giving Form AR4P to the payer for an eligible rollover distribution when you only want the 5%; the form says to use it there only to ask for more.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state withholding on retirement withdrawals, how Arkansas taxes 401(k) and IRA withdrawals, Arkansas retirement taxes, and retirement withholding calculator.
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Answer againSources
- AR4P Employee’s Withholding Certificate for Pensions and Annuity Payments with instructions (R 12/04/2025): https://www.dfa.arkansas.gov/wp-content/uploads/AR4P2026.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.