Guidance issued on unclaimed property distributions

Tax Hot Topics newsletterThe IRS recently issued Rev. Proc. 2020-46 allowing distributions to state unclaimed property funds to be eligible for a waiver of the 60-day rollover requirement for qualified retirement plans or individual retirement arrangements (IRAs). It also issued Rev. Rul. 2020-24 providing that payments from qualified retirement plans to state unclaimed property funds are subject to withholding and reporting, but may qualify for transition relief.

Sections 402 and 408 generally provide that any amount distributed from a qualified retirement plan or IRA will be excluded from income if transferred to an eligible retirement plan within 60 days after the day of receipt. The IRS issued Rev. Proc. 2016-47 in August 2016 providing procedures for taxpayers to self-certify for a waiver from the 60-day requirement, which included permissible reasons for missing the deadline.

Rev. Proc. 2020-46 adds distributions to state unclaimed property funds to the list of reasons provided in Rev. Proc. 2016-47. It is effective Oct. 16, 2020, and supersedes guidance on waivers of the 60-day requirement previously provided under Rev. Procs. 2017-47 and 2003-16.

Rev. Rul. 2020-24 provides that the payment of an accrued benefit from a qualified retirement plan is subject to federal income tax withholding under Section 3405 and reporting under Section 6047. However, the IRS has offered transition relief for payments made before Jan. 1, 2022, or the date it becomes reasonably practicable to comply with the requirements, whichever comes first.

Jeff Martin
Partner, Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

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