Many states have begun to treat IRAs as unclaimed property even before the owner can take a tax-free distribution. But now the IRS has ruled that escheatment is equivalent to a distribution and subject to federal income tax withholding and reporting requirements. Our Unclaimed Property Group dives into this dilemma for holders, owners, and states alike.
- Revenue Ruling 2018-17 concludes that escheatment of an IRA is a designated distribution
- Holders must honor federal tax withholding and reporting rules upon escheat
- States are aggressively auditing IRAs
- Potential negative impact on owners of these retirement assets
Read the full advisory here.