The IRS and Treasury have published (RIN 1545-BN52, TD 10008) on 18 October 2024 outlining final regulations regarding income tax withholding on certain periodic payments and nonperiodic distributions from employer deferred compensation plans, individual retirement plans, and commercial annuities that are not eligible rollover distributions.
The regulation addresses a payor’s obligation to withhold income taxes in the circumstances in which those payments or distributions are made to payees outside of the United States and affects payers and payees of those periodic payments and non periodic distributions.
The final regulations contains a final regulation under section 3405(e) that provides withholding guidance for payors of periodic payments and nonperiodic distributions under section 3405(a) and (b), respectively.
The regulation generally addresses a payor’s obligation to withhold under section 3405(a) and (b) in the following situations:
- payments to payees with a military or diplomatic Post Office address;
- payments to payees with a residence address located within the US;
- payments to payees with a residence address located outside of the US or who have not provided a residence address; and
- payments subject to withholding under subchapter A of chapter 3 (sections 1441 through 1446 of the Code).
The finalised definitions address the following:
- Payees with a military or diplomatic post office address under section 3405(a)(13)(A);
- Payees with a residence address located within the US under section 3405(a)(13)(A);
- Payees with a residence address located outside of the US or who have not provided a residence address under section 3405(e)(13)(B); and
- Payments are subject to withholding under subchapter A of chapter 3 under sections 1441 through 1446).
