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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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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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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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Unclaimed Property News Roundup

Posted By Administration, Wednesday, April 17, 2019

Unclaimed property often makes news headlines beyond the frequent reports of states trying to return money to their citizens. Following is a recap of some recent stories getting news coverage from local and national media outlets. 

 

The IRS is sitting on an estimated $1.4 billion in unclaimed tax refunds

On March 19, 2019, CBS News reported on an estimated $1.4 billion stockpile of unclaimed property held by the Internal Revenue Service. The funds represent income tax overpayments withheld from employee paychecks but not refunded because they neglected to claim their funds by filing a tax return. 

 

Louisiana residents receive unclaimed property checks

On March 19, 2019, several Louisiana news outlets reported on 44,000 residents receiving checks totaling $4.2 million from the state. The surprise payments represent returned unclaimed property resulting from 2018 legislation allowing the state Treasury and Department of Revenue to cross-reference information for the sole purpose of returning unclaimed property. An October 2018 mailing include 85,000 checks totaling $15 million. 

 

Don’t Mickey Mouse around with recovered unclaimed funds

On Feb. 20, 2019, ABC 12 reported on Genesee County (Michigan) County Clerk John Gleason’s unusual press conference regarding the use of recovered unclaimed property. Dressed in a (rather sad excuse for a) Mickey Mouse costume, Gleason expressed dismay over the authorization by the county commissioners to use funds returned to the county by the state to send three employees to Orlando, Florida, for five days of leadership, engagement and customer service training. 

Tags:  IRS  Louisiana  Michigan  taxes  unclaimed property 

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