IRA Distribution to Taiwan Citizen Beneficiaries (Non U.S. C
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Foreign Tax 02
by edandljpl » Wednesday August 10, 2011 3:00 pm
U.S. Client has Taiwan citizen based and located sister, nephew and niece as her primary and contingent beneficiary(s) on all IRA(s).
Due to no U.S. Social Security and Tax I.D. Numbers, what is their (beneficiaries) expected tax treatment (both Federal and State of Minnesota) previous to a distribution upon IRA owner’s death.
Please advise.
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edandljpl
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Joined: Mon Mar 14, 2011 12:44 pm
Permalink Submitted by mk foss on Wed, 2011-08-10 23:51
The IRS requires that U.S. tax be withheld from IRA distributions paid to someone residing outside the U.S. The withholding rate recently was 30% or the treaty rate between the two countries, whichever is less. The withholding is designed to pay the U.S. tax on the distribution to a noncitizen. The custodian will require that a taxpayer identification number be obtained for the beneficiary receiving benefits – not a social security number.
The State of MN would only tax benefits paid to a resident of the state. Federal law prohibits a state from collecting income tax on retirement benefits paid to someone residing in another state or tax jurisdiction.
That’s all I know on the subject. You’d have to consult an international tax expert for anything further.