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NAUPA Offers Guidance for Reporting IRAs and Tax Withholding

Posted By Administration, Thursday, December 5, 2019

On May 29, 2018, the Internal Revenue Service issued Revenue Ruling 2018-17, clarifying the agency’s position on traditional individual retirement account escheatment. Specifically, the ruling states that IRA holders – or trustees – must withhold 10 percent federal income tax and issue form 1099Rs when reporting unclaimed IRAs to the states. Holders are expected to comply by Jan. 1, 2020.  

 

The Holders Coalition – a group of organizations, including UPPO, whose members hold or represent owners of property – submitted comments on Sept. 4, 2018, and Nov. 19, 2019, to IRS and Department of Treasury officials regarding implementation concerns about the ruling. 

 

In November 2019, the National Association of Unclaimed Property Administrators issued the following guidance for retirement plan administrators to foster the uniform reporting of unclaimed IRAs and their tax withholding under IRS Revenue Ruling 2018-17 within the NAUPA II format. 

 

On January 1, 2020, The Internal Revenue Service’s Revenue Ruling 2018-17 will go into effect concerning withholding and reporting taxes with respect to payments from Individual Retirement Accounts (“IRAs”) to state unclaimed property programs. Holders reporting these properties should make use of the NAUPA Standard Deduction and Withholding code “TW” to represent “Income Tax Withheld.”

 

The value “TW” should be recorded in the PROPERTY record in the PROP-DEDUCTION-TYPE field. The amount of Federal Tax Withheld should be stored in the PROP-DEDUCTION-AMOUNT field. This code should be used for any taxes withheld from remitted properties.

 

The value of the property before the deduction should be stored in the PROP-AMOUNT-REPORTED field. The amount remitted to the state after the Federal Tax Withholding should be stored in the PROP-AMOUNT-REMITTED field. 

 

It is imperative that all withheld taxes are reflected in reports of unclaimed property, so that the claimants may be so advised and address this in conjunction with their tax reporting.

 

In the event of multiple deductions, the Tax Withholding code should take priority. Since only one deduction field is available, the state and federal withholdings should be totaled for inclusion. We hope that holders would consider providing additional information to the states for the detail of the deductions.

 

For more information related to the NAUPA reporting standard, please visit:

https://unclaimed.org/wp-content/uploads/NAUPAStandardElectronicFileFormat-11.20.19.pdf.

 

Companies who withhold taxes should report and remit those taxes to the Internal Revenue Service or other taxing agency. Contact your legal or tax advisor for reporting and remittance instructions. For more information on the Revenue Ruling 2018-17, visit: https://www.irs.gov/pub/irs-drop/rr-18-17.pdf.

 

UPPO will continue to monitor and report on developments related to IRS Revenue Ruling 2018-17. 

Tags:  IRAs  taxes 

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Comments on this post...

Becky Stephens, U.S. Bank says...
Posted Thursday, December 5, 2019
Since there is only one deduction field in the NAUPA file format, any property that may have had a deduction other than the federal tax payment withheld, won't truly reflect what NAUPA may be expecting to see as a deduction. All deduction amounts have to be input as one deduction amount with the current NAUPA format.
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