W8-BEN Form and US Tax

FYI here is my reply to TIAA-CREF

Your interpretation of the Treaty and its interaction with IRS rules is unfortunate as it requires an NRA resident in the UK to file a 1040NR to claim back the 30% withholding as they have no US tax liability on any payment (other than a lump sum) from a US qualified retirement plan.

I will share your policy with people in similar circumstances so the can decide whether to move their retirement savings to another provider that does not apply the 30% withholding.

FYI, Here is TIAA's latest reply. I would advise any non-US citizens moving back to the UK to rollover their retirement accounts to another provider that does not impose the 30% withholding on non-periodic payments.

The note that it's possible to opt out of withholding on RMDs is strange....I think that that's only for US citizens.

Thank you for your reply to my previous email.  I appreciate your taking the time to follow up with the requested clarification.

I regret any inconvenience.

I have included the text of my first email which outlines the tax withholding treatment of withdrawals made by a citizen of the United Kingdom living in the United Kingdom.

As an important note, you are permitted to opt-out of withholding for payments from a Lifetime Annuity, a from a Fixed Period Annuity of more than 10 years in length, or payments that are made in order to satisfy the IRS RMD rules at age 70-1/2.

Unfortunately, the payments listed below, with the exception of payments from a Lifetime Income Annuity,  are considered non-periodic payments for the purposes of withholding based on the tax treaty between the United States and the United Kingdom.

If you provide an IRS W-8 BEN form is provided confirming your U.K. citizenship, the U.S. federal withholding, if any, is listed below:

“1) the payment is part of a ten year transfer payout annuity”

This payment would be considered a non-periodic payment of less than 10 years in length and would be subject to 30% federal tax withholding based on the tax treaty between the United States and the United Kingdom. Transfer Payout Annuity payments are distributed in 10 essentially equal payments over a nine year period.

“2) TIAA-Traditional is converted to an annuity and the payment is annuity income.”

This payment would be considered a periodic payment and would not be subject to mandatory federal tax withholding based on the tax treaty between the United States and the United Kingdom.

“3) the payment is interest only”

This payment would be considered a non-periodic payment and would be subject to 30% federal tax withholding based on the tax treaty between the United States and the United Kingdom.

“4) the payment is an ongoing  systematic withdrawal made every quarter.”

This payment would be considered a non-periodic payment and would be subject to 30% federal tax withholding based on the tax treaty between the United States and the United Kingdom.

I just got this interesting email from TIAA. I suggest any UK resident NRAs having 30% withheld contact TIAA.

I am writing to you regarding your inquiries regarding the tax treaty rates and mandatory withholding for withdrawals from your TIAA retirement accounts for UK resident NRAs when a valid W-8BEN is on file at TIAA.   Your requests and feedback have been forwarded to me to pursue additional research regarding the UK/US tax treaty.

Upon further research regarding the treaty and consultation with our tax department, TIAA withholds 30% from any non-periodic withdrawals from your contract.  There is an exception for the UK that allows us to refund the taxes withheld, upon request, from any distributions other than the 30% withheld from a full lump sum withdrawal.  In other words, you are able to contract TIAA via email, mail, or telephone to request a refund of any taxes withheld from systematic, interest only, RMD, or Transfer Payout Annuity payments from your contract.    A refund of the taxes would eliminate the need to file a 1040NR to claim back any taxes withheld. 

We are working to eliminate the added steps of withholding taxes from non-periodic withdrawals and then processing the requested refund of these amounts; however, I am unable to provide a timeframe for an update to this process.

Thought I would provide a brief update, as it seems this situation has been coming up in one or two new threads.

I bit the bullet and made a withdrawal from TIAA-CREF, wired directly to my UK-based sterling current account. A few observations:

The process was relatively painless and quick. I realised that the best way was to do this via calling them and speaking directly. They filled in the withdrawal information and sent me the form and I just filled in one or two blanks and signed it. I sent them (via a secure message on their Web platform) a scanned copy of the completed, signed withdrawal form, plus the wire information (they use the Global Pay system for wiring in either USD or local currency), plus yet another W-8BEN form, plus information to verify my UK bank account.

There was no transfer fee. I guess I should be thankful for small mercies.

The exchange rate seemed pretty decent. From what I could tell, it was about 1.5 cents above the mid-rate (the amount was a little over $13k net after tax withholding - see below).

As expected, they withheld 30%, Grrrrr.

I managed to get in under the wire (before end of the tax year), so I plan to submit a 1040-NR as soon as possible to retrieve the $5k or so they withheld.

Re: the above, can I ask whether I can submit my tax return any time from now? I printed off the 1040-NR and plan to remind myself what a 1040 looks like and what documentation I will need. TIAA-CREF did not really provide much of an official statement of the tax withheld - all I have currently is a screenshot under the "Income Summary" section of my account page that shows a deduction of ca $5.6k. It also says on the same Web page "Tax Information: View your tax statements to see the actual income amount distributed.", but at the moment there are no tax reporting forms in my account documents page. Do I need to wait until a tax reporting document appears or will the IRS know that TIAA-CREF withheld 30%?

I am hoping that once I have been through the whole process once, it will be easier after that, except for the IRS having 30% of my money, interest-free, until the tax year ends. 

Wait for the 1099-R from TIAA-CREF before you file as you need it to show the tax withheld.

Have you contacted TIAA-CREF and asked fro a refund of the withholding as the claimed you can do in the email the sent to me?

I think what you get, if it is the same as my Fidelity IRA withdrawal, will be a 1042-S form (Copy B) from the withholding agent, which is sent to the IRS as well (Copy A).

1099-R I think is for US businesses or residents only, whereas 1042-S is for foreign Person's U.S. Source Income Subject to withholding.

Fidelity say on their website that this form won't be available online but will be sent to your address of record sometime in March. Why so late I don't know, but at least being overseas means you have two extra months to file a return.

Wait for the 1099-R from TIAA-CREF before you file as you need it to show the tax withheld.

Have you contacted TIAA-CREF and asked fro a refund of the withholding as the claimed you can do in the email the sent to me?

Thanks, Nun, I do plan to try that. I'm a bit like a beat dog at the moment after over 3 years of hitting the same brick wall with TIAA-CREF (actually, not the same brick wall - the answers seem to change every time).

I currently have a formal complaint pending with them and have oddly been receiving direct emails from the customer resolutions manager (I have never received anything other than secure messages on the TIAA site before). I plan to call him either later today or early next week. As part of the discussion, I'll see what he says about the message you received, but I don't hold out much hope.

On a positive note, a chunk of the lump I just withdrew will be paying for a brand-new, Scottish-built gravel bike for my 60th birthday. 

On a positive note, a chunk of the lump I just withdrew will be paying for a brand-new, Scottish-built gravel bike for my 60th birthday. 

At last some good news. I've been doing some part-time work and plan to spend it on either a Salsa Warbird or a Santa Cruz Stigmata.

http://salsacycles.com/bikes/warbird/2017_warbird_carbon_ultegra

Here's the Stigmata bizarrely being ridden through Haworth, but it has snow, Bronte country, the Stigmata, Steve Peat and Laura Marling......pretty awesome all round.

At last some good news. I've been doing some part-time work and plan to spend it on either a Salsa Warbird or a Santa Cruz Stigmata.

http://salsacycles.com/bikes/warbird/2017_warbird_carbon_ultegra

Here's the Stigmata bizarrely being ridden through Haworth, but it has snow, Bronte country, the Stigmata, Steve Peat and Laura Marling......pretty awesome all round.

Ha - I have seen that vid before! I love videos like that, they really inspire you to get out on the bike.

I'm getting my bike made from steel by Steve Shand at Shand Cycles. Still not sure whether to go with the Stooshie or Stoater, so I am heading to the workshop later this month to make the final decision. It takes them 6-10 weeks to put together a made-to-order bike (all done in-house from start to finish, nothing from Taiwan) so if I am lucky it will be ready in time for for my birthday.

Those look awesome! I'd be tempted by the Stooshie because I don't tour with panniers and I like the idea of a bit more response. But I'm going to get some carbon adventure/gravel/endurance type bike with bigger tire clearances than my Cervelo RS for touring and probably modify the gearing slightly.

I just got this interesting email from TIAA. I suggest any UK resident NRAs having 30% withheld contact TIAA.

Hi Nun:

I am due to speak with a (or should I say "yet another") customer resolutions manager from TIAA. I don't suppose the message you pasted here had a name at the end of it. did it? It would be good to recite a name of the employee, if possible. I noticed the last two secure messages I received had no name on them ...

Wait for the 1099-R from TIAA-CREF before you file as you need it to show the tax withheld.

Have you contacted TIAA-CREF and asked fro a refund of the withholding as the claimed you can do in the email the sent to me?

Just a brief follow-up that I have indeed, formally requested a refund, as per your suggestion. I'll keep you updated.

Just a brief follow-up that I have indeed, formally requested a refund, as per your suggestion. I'll keep you updated.

Latest update on the situation:

"I am responding to you inquiry in your email exchanges with  Mr. [TIAA Customer Resolution Manager] on January 25, 2017.
 
First, I want to thank you for your patience while this response was prepared.  Secondly, I appreciate you taking the time to share your perspectives in your email. It is this type of feedback that affords us the opportunity to provide better service to our clients by reevaluating and reexamining our processes. Pursuant to your email I have been in contact with our Tax Department.
 
We believe that, based upon the information at our disposal, Article 17 of the Tax Convention Treaty as between the United States and United Kingdom (“Treaty”) is dispositive in situations where lump-sum distributions from pension and annuity plans are concerned. The issue here involves whether or not your gross distribution in the amount of $XXXXX constitutes a lump-sum distribution for purposes of the Treaty. TIAA currently considers non-periodic distributions, such as your distribution, as lump-sum distributions.  The Treaty does not define lump-sum (or non-periodic payments), while the IRS defines lump-sum distributions to be a “distribution or payment within a single tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind.”

We are currently addressing this issue, but unfortunately it does not help your current situation. Even if TIAA were to recode the distribution and Article 19 applies, as you were employed by a public university, it is an impossibility for TIAA to reverse the withholding and refund it to you as our books and records for 2016 are closed and the payment has already been made to the US Treasury. TIAA can’t seek a reversal from the Treasury and refund it to you directly.
 
You are permitted to seek a refund directly from the US Treasury. We would consider offering reimbursement for any reasonable fees associated with filing a 1040NR. TIAA would need documentation verifying those fees.
 
We apologize for any inconvenience this issue may have caused.  Again, we are currently reviewing our internal procedures to hopefully avoid similar occurrences in the future.  "

<<sigh>> So the next step is that I am about to make another withdrawal, so as this is a new tax year I plan to get from them some assurance that they can/will refund any tax that is incorrectly withheld on that one.

Watch this space.

Have you filed your taxes yet to get the refund for last year?

Have you filed your taxes yet to get the refund for last year?

I can't do that until late March, because TIAA don't provide the necessary tax form (1042-S?) until March 15th. I don't know how long it will then take to get the refund,or how complicated it will be (e.g., will IRS charge for wiring to the UK? Will they convert to ££ if asked? I'm guessing not).

I'm about to make another withdrawal and if TIAA continue being as obstructive as they have been, I calculate it will be at least 13+ months before I get any withholding back.