Distribution to non-resident alien procedure

[30Rock]

We have a non-resident alien beneficiary, living in Mexico. What is the procedure for paying out a distribution? Does the administrator send the distribution form along with a W-9 and if beneficiary does not produce a SSN or TIN, or W-8BEN then withhold 30%?

Thanks

[Nassau]

In order for the Recordkeeper/trustee to correctly report the distribution due to death to the IRS, an ITIN and tax forms may be required, such as a IRS Form W-8BEN.

Please look to the plan's administrative procedures concerning whether the ITIN can be deferred until the time of death transfer. Generally a beneficiary designation may be completed with the beneficiary's address in lieu of their SSN. Please note that a dummy SSN is only a work around and distributions should never occur under a dummy SSN. This process could be used when the beneficiary does not have a SSN or ITIN (Individual Tax Identification Number). However, no distributions should occur until Recordkeeper/Trustee receives either the ITIN on IRS Form W-8BEN (nonresident aliens) or SSN on IRS Form W-9 (resident aliens). The nonresident alien beneficiary would be responsible for U.S. federal income tax at the U.S. rates on distributions from a U.S.qualified plan and trust unless they are eligible for reduced withholding at a tax treaty rate which they would claim on IRS Form W-8 BEN (submitted with the distribution paperwork).

More information on this issue is contained in IRS Publication 519. If the beneficiary is not in a country that has a tax treaty with the U.S., then full back-up withholding applies at a rate of 30%. The Tax Department could verify the treaty status of the beneficiary's country of residence at the time of payout. To determine if the employee is a nonresident alien for federal tax purposes and the impact of tax treaties, the beneficiary should review this publication in detail and should consider contacting a tax professional.

The beneficiary can apply for an ITIN using IRS Form W-7------> http://www.irs.gov/pub/irs-access/fw7_accessible.pdf