Deemed Distributions

[Guest terid]

When a 1099R is being issued for a deemed distribution, do you have to have the participant elect if they want taxes taken out or not?

My understanding is since the deemed distribution is not an eligible rollover distribution, the 20% mandatory withholding does not apply. No withholding is required, even if the participant has not formally elected to waive withholding, unless other case or property is bein distributed at the same time as the deemed distribution.

I need to find a code somewhere that shows participant election is not necessary. Do you know where?

[R. Butler]

I'm not sure I completely understand the question, but there is generally not withholding on a deemed distribution. See 1.72(p)-1.

[Guest terid]

Our problem is we have a committee who is thinking it is mandatory to give a form to the participant, who has the deemed distribution, so they can elect out of withholding. I understand is that this is not necessary, but I can't find this in writing anywhere.:confused:

[R. Butler]

Reg. 1.72(p)-1 Q&A 15 states that deemed distributions are generally not subject to withholding.

http://benefitsattorney.com/cgibin/framed/...gi?ID=64&id==64

[Guest terid]

Perfect.....Thanks!!