Withholding on Distributions under $200

[RCK]

I know that we don't need to take withholding on (rollover eligible) distributions of less than $200. And I know that for administrative reasons, I don't want to take withhlding on those distributions.

But my recordkeeper is saying that their system is set up to take withholding on all (rollover eligible) distributions, and they do it for all their clients.

So I'm trying to get a sense of the market-who is taking withholding on those small forceouts, and who is not?

RCK

[Blinky the 3-eyed Fish]

Why make extra work for yourself either way? It is easiest for me to just pay out the people under $200, so I do that. It sounds like in your recordkeeper's situation the opposite is easiest.

[RCK]

Right. Taking the withholding is easy for the recordkeeper. But we have to deal with trying to recapture the federal and state withholding on lost and stale checks, and coordinating with the trustee. (Trustee is not the recordkeeper)

And I'm trying to get some feedback that will get me grounds to go to them and say that the best practice is to NOT do withholding on under $200 distributions.

RCK

[maverick]

I agree w/Blinky, why do something you don't have to? If you take federal w/h on dists under $200, you have to include the w/h on the 945. In my situation, some plans have no other distributions, so I'd be stuck with preparing a 945.