20% Mandatory Withholding

[rblum50]

          I have a client with a 401(k) Plan. A prior plan participant is removing their account balance and is taking the money directly. They will receive 80% of their vested balance with the remaining 20% being transferred to the IRS electronically through the EFTPS program. What is the latest date that the plan can transmit the 20% to the IRS? I would assume that the plan has until the date the plan's annual filings, plus extensions, are filed. I just want to make sure of this.

[justanotheradmin]

That is incorrect. The due date depends on a variety of factors, amount particularly, but many plans are on weekly, monthly, or quarterly deposit timing. 

If the tax is not required to be remitted right away, and it is small enough to be sent in with the Form 945, it is subject to the form filing due date, typically January 31 after the year ends. 

The 20% withholding is 945 tax type, so if you look for information on that, you should be able to get additional information. 

Note: When the Form 945 is due is not the same as when the actual $$ must be sent in. The $$ typically have to be sent in sooner. 

[Lou S.]

If you are doing it through EFTPS, why wouldn't you do it concurrent with the withdrawal? But as justanotheradmin points out the timing could vary wildly based on the amount of withholding and tax payers timing requirements.

[Peter Gulia]

If an amount withheld for a payment toward Federal income tax is not paid to the US Treasury the same day as or promptly after the amount is segregated from the distributee’s individual account, which account under the plan’s trust gets the float value of the amount not yet paid over?