Guest KD40 Posted April 9, 2003 Share Posted April 9, 2003 When we issue ADP refund checks after March 15th of a given year, we withhold 10% taxes from the individuals check when the amount is greater than $200. I have been told that this is an IRS mandatory withholding for money refunded where it is taxable in the current year, but can someone point me in the direction of the IRS language stating this fact? Thanks. Link to comment Share on other sites More sharing options...
pmacduff Posted April 9, 2003 Share Posted April 9, 2003 I don't think this is true at least from a qualified plan standpoint. The mandatory withholding only applies to "eligible rollover distributions" which excess contributions are not. I think some investment firms tend to impose their own rules on these types of distributions, but to my knowledge there is no 10% mandatory withholding after March 15th. I wonder if someone was confusing the Employer excise tax on the contributions as they weren't timely withdrawn...???? Link to comment Share on other sites More sharing options...
R. Butler Posted April 9, 2003 Share Posted April 9, 2003 The 10% withholding is optional, but the participant must affirmatively elect out of the withholding. See 3405(b). Link to comment Share on other sites More sharing options...
pmacduff Posted April 9, 2003 Share Posted April 9, 2003 R. Butler - Thanks for the cite....are you following me this afternoon??? Link to comment Share on other sites More sharing options...
MWeddell Posted April 10, 2003 Share Posted April 10, 2003 Also, note that if a distribution (such as this one) is not an eligible rollover distribution and is > $200, then the payor must notify the recipient of his/her right to elect not to have income tax withheld. One isn't permitted to just process these distributions with 10% withholding without giving participants the chance to elect. See Treas. Reg. 35.3405-1T, Part D. Link to comment Share on other sites More sharing options...
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