30% withholding

[Guest 401kproman]

Is anybody aware of any IRS reg, ruling, notice, etc. that requires 30% withholding if a participant does not provide an address when requesting a distribution or none is on a recordkeeper's file?

[Guest Harry O]

Backup withholding is 31% if I recall correctly.

[Guest 401kproman]

No, I don't mean backup withholding. I'm writing about a qualified retirement plan, which is not subject to back-up withholding.

I also am not writing about tax withholding for Non-resident aliens unless somebody knows that the IRS considers "no address" as automatically being an NRA.

[david rigby]

My guess is that some plan sponsor is creating an "incentive" for the plan participant to maintain current address information. Of course, the incentive would be meaningless unless well-communicated.

[Kirk Maldonado]

Isn't there a 30% withholding requirement for payments made to nonresident aliens? (I realize that this is a bit of a stretch.)

[Guest 401kproman]

No, not non-resident aliens.

A major institution's (401(k) distribution form and procedure is to withhold 30% on any distribution, other than a rollover, from any participant (US citizen or not) if there is no address.

I researched the regs, etc. and can find no reference. That's why I'm asking here. Maybe I've missed something.

[mbozek]

The 30% withholding applicable to payments to non resident aliens is in IRC 1441. The IRS applies 30% withholding to any payments which are being distributed to an address outside the US to prevent evasion of US income taxes by US citizens. The payor is probably applying a default rule to payments made to a participant who gives no address to avoid an under withholding penalty. By the way how can the plan may a payment to a participant who does not have an address in the plan's records?

[Guest 401kproman]

That's whats so screwy. If the check goes to the plan administrator in the US then they know the address and also the cirtizenship. I would think if the IRS made this rule as opposed to the recordkeeper, then there would be some other logical checking before withholding 30% instead of 20%.

I ask again, does anybody know of anything in wroting by the IRS?

[Guest LVanSteeter]

Just another thought, is the 30% all on the Federal level or is the plan (or recordkeeper) withholding 20% at Federal level and 10% at the State level?

I know that many states have agreements with the major companies for state withholding.

[Guest 401kproman]

Nope, only Federal.

[Guest Reywal]

There is no basis for withholding 30 % under the circumstance that you present