Above & Beyond Retirement, LLC
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Payments to State Unclaimed Property

Recently the IRS clarified tax withholding and reporting requirements for retirement account payments to State Unclaimed Property Funds in Rev. Rul. 2018-17

Unlike payments to a rollover IRA account, transitioning funds out of a retirement account and into a State Unclaimed Property Fund does not allow preservation of the tax favorable status for the funds being disbursed.  Accordingly they are deemed taxable to the participant, even though in this case, the participant has not actually received them direclty yet.

Effective January 1, 2019 all trustee initiated retirement payments (issued without account holder / participant consent) to State Unclaimed Property Funds are:


I)  Subject to Income Tax Withholding - 10% income tax withholding rate applies

2) Subject to Tax Reporting in the year of distribution - A Form 1099-R also needs to be issued reporting the amount paid  from the retirement account to the State Unclaimed Property Fund as taxable income to the participant for the year in which the transaction occurs.

Angie Darby