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Paying Federal & State taxes on distributions


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6 minutes ago, ESOP Guy said:

So are these payments for the bank's plan or are you being hired by a plan completely unrelated to the bank to make the payments? 

Yes, we manage other retirement plans. We handle distributions, process 1099-R's for the participants and file the 945's.

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Ok, we are entering an area of law that I am not an expert on.  All I can tell you is when our clients use bank trust companies to have the check paid the EIN we always see is the trust company's EIN not the plan's on the 1099-R. I have done enough 945s to know the 1099-Rs and 945s have to reconcile.  If you have differences between the 1099-Rs and 945 taxes withheld you get a letter from the IRS. Maybe one of the lawyers who read these posts can give a deeper look at the law as to why the trust company's EIN is used. 

The trust company is the payor and the plan's Form 5500 reports the EIN of the payor on the Sch R is what the plan does in these cases. 

I hope I am helping more then hurting.  But at this point for me to give any more advice is to give advice out of my sphere of competency. 

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I think it really depends on your service agreement with the client.  The custodian can indeed process distributions under its own EIN, and that is common, probably universal, with recordkeeping platforms.  If you've withheld and submitted taxes, then you darn well better do the rest of the reporting under the same EIN.

Ed Snyder

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Agree that bank can use its EIN under an agency agreement. Don't think there is any reg on this, but somewhat oblique references in instructions to IRS forms to permissibility of this, as I recall. Would have to find the research. In any event, it is very commonly done by the State Streets and BNY Mellons of this world.

If the plan is not institutionally trusteed, e.g. small plan and business owner is the trustee, I think you might use the employer's EIN, and just use the trust's EIN for investments (e.g., the 1099-INTs and -DIVs, etc., received by trust). Doesn't the employer deposit its wage withholding and plan withholding (e.g., 20% on lump sums where no direct rollover) on one 941 and one 945?

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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