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NAUPA Provides Additional Guidance for Reporting IRAs and Tax Withholding

Posted By Administration, Thursday, January 16, 2020

The National Association of Unclaimed Property Administrators has provided additional guidance regarding reporting of unclaimed IRAs and their tax withholdings within the NAUPA II format under IRS Revenue Ruling 2018-17. 

 

As UPPO previously reported, NAUPA issued preliminary guidance to holders in November 2019. It advised holders to use the NAUPA Standard Deduction and Withholding code “TW” in the PROP-DEDUCTION-TYPE field of the Property record to represent “Income Tax Withheld.” In addition:

  • The amount of federal tax withheld should be stored in the PROP-DEDUCTION-AMOUNT field. 
  • The value of the property before the deduction should be stored in the PROP-AMOUNT-REPORTED field.
  • The amount remitted to the state after federal tax withholding should be stored in the PROP-AMOUNT-REMITTED field. 

UPPO questioned how holders should handle situations when they have multiple deductions, as the PROP-DEDUCTION-AMOUNT field only accommodates one. For example, a holder may have a deduction for mailing costs and the income tax withheld. UPPO also asked NAUPA to clarify whether federal and state tax withheld would be combined and recorded as one amount within the NAUPA file. 

 

On Dec. 5, 2019, NAUPA issued follow-up guidance to include, “In the event of multiple deductions, the Tax Withholding code should take priority,” and the state and federal withholdings should be totaled for inclusion. 

 

In response, UPPO requested additional clarification regarding how holders should populate the file when the property is a security and part of that security must be liquidated to pay the 10% tax withholding, as there is only one property record on the file. 

 

NAUPA responded on Dec. 17, 2019, with the following example of escheating 100 shares with each share worth $1.

 

PROP-AMOUNT-REPORTED              10.00

PROP-DEDUCTION-TYPE                   TW

PROP-DEDUCTION-AMOUNT             10.00

PROP-AMOUNT-REMITTED                0.00

 

PROP-NUMBER-OF-SHARES             100.0000

PROP-DEL-SHARES                            10.0000

PROP-REM-SHARES                           90.0000

 

The description field will indicate the sale:

PROP-DESCRIPTION                   PARTIAL SALE OF SECURITIES FOR TAX WITHHOLDINGS

 

NAUPA has stated that typically most states instruct holders to use separate properties for cash and securities, but this would be a valid reason for an exception.

 

Some holders have expressed concerns that not all states will abide by the guidance. Although NAUPA cannot regulate whether states adopt its guidance, it is educating them on the issue and the benefits of doing so. 

Tags:  IRAs  IRS  NAUPA  taxes 

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