Starting this year, the IRS requires holders to deduct the 10% federal tax from traditional IRAs prior to unclaimed property reporting. NAUPA recommends using the TW “Income Tax Withheld” standard deduction code in this case. The value of the property before the deduction should be put in the PROP-AMOUNT-REPORTED field, and the amount after the 10% deduction goes in PROP-AMOUNT-REMITTED.
The majority of states I have contacted have confirmed that they are following the NAUPA guidance, but I have run into a few exceptions, notably Colorado, which currently does not support the use of TW. Colorado asks that holders report and remit the post-deduction amount, without mentioning the federal tax withholding at all. We also have discovered that Mississippi’s system does not recognize TW, and instead requests that the SW deduction code be used instead.
Our software will be updated to create the NAUPA file according to the individual state requirements as more information comes in.
See the entire NAUPA guidance