Can a UK citizen opt out of US witholding tax on Inheritance payment?

effingpot

We have been left some money by a US relative who has sadly died.
The US forms all ask us if we want US Federal and State tax witheld at source or not.
Then warn about fines if we answer wrongly.
We have been unable to find out what the rule is, as we are UK citizens.
Anyone know, or know how we can find out? (We provide our UK tax number for the TIN)
Thanks

Mike
Example question below:

poseidon1

effingpot said:

We have been left some money by a US relative who has sadly died.
The US forms all ask us if we want US Federal and State tax witheld at source or not.
Then warn about fines if we answer wrongly.
We have been unable to find out what the rule is, as we are UK citizens.
Anyone know, or know how we can find out? (We provide our UK tax number for the TIN)
Thanks

Mike
Example question below:

Seems to be clear that you cannot make the election   '.... or if payments are to be delivered outside the United States and its possessions. '

Presumably you will require payment to the UK therefore outside the United States?

Also note the net estate income is also reportable in the UK for higher rate tax purposes ( you get a credit for the US tax paid at source).

effingpot

poseidon1 said:

effingpot said:

We have been left some money by a US relative who has sadly died.
The US forms all ask us if we want US Federal and State tax witheld at source or not.
Then warn about fines if we answer wrongly.
We have been unable to find out what the rule is, as we are UK citizens.
Anyone know, or know how we can find out? (We provide our UK tax number for the TIN)
Thanks

Mike
Example question below:

Seems to be clear that you cannot make the election   '.... or if payments are to be delivered outside the United States and its possessions. '

Presumably you will require payment to the UK therefore outside the United States?

Also note the net estate income is also reportable in the UK for higher rate tax purposes ( you get a credit for the US tax paid at source).

Well it says "if we do not have a valid TIN" but it's not clear if our own Tax Id Number is "valid" or not for this particular question.

Also the email from the USA says "Attached are the claim forms from Prudential and American Equity for your share of <Name's> annuities, IRA and life insurance." - which I hope adds a bit of clarity?

I can't see a way to attach the forms so here is one of them with the question 9 on page 4 being the one we'd love to turn off federal and state tax! => www.effingpot.com/AEL-IRA-Claim-form.pdf

sheenas

If you’re not as US citizen then you don’t have a TIN as that is an IRS identification number.  In the UK we have a UTR tax id.

poseidon1

effingpot said:

poseidon1 said:

effingpot said:

We have been left some money by a US relative who has sadly died.
The US forms all ask us if we want US Federal and State tax witheld at source or not.
Then warn about fines if we answer wrongly.
We have been unable to find out what the rule is, as we are UK citizens.
Anyone know, or know how we can find out? (We provide our UK tax number for the TIN)
Thanks

Mike
Example question below:

Seems to be clear that you cannot make the election   '.... or if payments are to be delivered outside the United States and its possessions. '

Presumably you will require payment to the UK therefore outside the United States?

Also note the net estate income is also reportable in the UK for higher rate tax purposes ( you get a credit for the US tax paid at source).

Well it says "if we do not have a valid TIN" but it's not clear if our own Tax Id Number is "valid" or not for this particular question.

Also the email from the USA says "Attached are the claim forms from Prudential and American Equity for your share of <Name's> annuities, IRA and life insurance." - which I hope adds a bit of clarity?

I can't see a way to attach the forms so here is one of them with the question 9 on page 4 being the one we'd love to turn off federal and state tax! => www.effingpot.com/AEL-IRA-Claim-form.pdf

So to be clear, these are in fact benefits derived from the deceased relative's employment related benefit package ie IRA and death in service benefits?

First thing to note is all the forms  you receive from US institutions  presuppose you are American based beneficiaries.

As such SSNs and TINs are relevant to US based beneficiaries since if receiving income untaxed they can report on their own  IRS tax returns to ensure US taxable income is eventual taxed in the US if not witheld at source.

As to the form you supplied, I assume you plan to  complete section 5 at page 2 (Designated  Beneficiary ) and opt for option 3 ( lump sum payout ) ? You will have noted the suggestion in section 5  that you seek tax advice before making your choice. You should do so, since taking the lump sum may trigger excessive UK income tax based on UK rules on the taxation of IRA lump sums.

In this regard I would strongly advise you read through the recent thread below from an OP in your similar circumstances.

https://forums.moneysavingexpert.com/discussion/comment/81441184#Comment_81441184

You will note from the thread that  some form of  US withholding tax is unavoidable, but completing a W 8Ben ( as indicated in section 10 page 4 of your form) may limit the severity of a deduction which amounted to 30% suffered by the OP of that thread.  Furthermore, depending on the size of the inherited IRA you maybe better off electing for the 10 year deferral option to spread your benefit over a number of UK tax years, to limit UK taxes.

In any event, you are strongly advised to take UK advice before completing any forms, to ensure you don't fall into the same tax trap as the OP in the thread. The link to the Edale article  included in one of my posts in the thread might provide helpful insight prior to seeking specific advice.

effingpot

poseidon1 said:

effingpot said:

poseidon1 said:

effingpot said:

We have been left some money by a US relative who has sadly died.
The US forms all ask us if we want US Federal and State tax witheld at source or not.
Then warn about fines if we answer wrongly.
We have been unable to find out what the rule is, as we are UK citizens.
Anyone know, or know how we can find out? (We provide our UK tax number for the TIN)
Thanks

Mike
Example question below:

Seems to be clear that you cannot make the election   '.... or if payments are to be delivered outside the United States and its possessions. '

Presumably you will require payment to the UK therefore outside the United States?

Also note the net estate income is also reportable in the UK for higher rate tax purposes ( you get a credit for the US tax paid at source).

Well it says "if we do not have a valid TIN" but it's not clear if our own Tax Id Number is "valid" or not for this particular question.

Also the email from the USA says "Attached are the claim forms from Prudential and American Equity for your share of <Name's> annuities, IRA and life insurance." - which I hope adds a bit of clarity?

I can't see a way to attach the forms so here is one of them with the question 9 on page 4 being the one we'd love to turn off federal and state tax! => www.effingpot.com/AEL-IRA-Claim-form.pdf

So to be clear, these are in fact benefits derived from the deceased relative's employment related benefit package ie IRA and death in service benefits?

First thing to note is all the forms  you receive from US institutions  presuppose you are American based beneficiaries.

As such SSNs and TINs are relevant to US based beneficiaries since if receiving income untaxed they can report on their own  IRS tax returns to ensure US taxable income is eventual taxed in the US if not witheld at source.

As to the form you supplied, I assume you plan to  complete section 5 at page 2 (Designated  Beneficiary ) and opt for option 3 ( lump sum payout ) ? You will have noted the suggestion in section 5  that you seek tax advice before making your choice. You should do so, since taking the lump sum may trigger excessive UK income tax based on UK rules on the taxation of IRA lump sums.

In this regard I would strongly advise you read through the recent thread below from an OP in your similar circumstances.

https://forums.moneysavingexpert.com/discussion/comment/81441184#Comment_81441184

You will note from the thread that  some form of  US withholding tax is unavoidable, but completing a W 8Ben ( as indicated in section 10 page 4 of your form) may limit the severity of a deduction which amounted to 30% suffered by the OP of that thread.  Furthermore, depending on the size of the inherited IRA you maybe better off electing for the 10 year deferral option to spread your benefit over a number of UK tax years, to limit UK taxes.

In any event, you are strongly advised to take UK advice before completing any forms, to ensure you don't fall into the same tax trap as the OP in the thread. The link to the Edale article  included in one of my posts in the thread might provide helpful insight prior to seeking specific advice.

Thank you - we've tried two UK based Tax advisors with alleged US experience and neither know how to do this. If anyone knows of someone qualified to help complete this process we're all ears. Thanks for the link - that looks like someone who may be in the know!

poseidon1

effingpot said:

poseidon1 said:

effingpot said:

poseidon1 said:

effingpot said:

We have been left some money by a US relative who has sadly died.
The US forms all ask us if we want US Federal and State tax witheld at source or not.
Then warn about fines if we answer wrongly.
We have been unable to find out what the rule is, as we are UK citizens.
Anyone know, or know how we can find out? (We provide our UK tax number for the TIN)
Thanks

Mike
Example question below:

Seems to be clear that you cannot make the election   '.... or if payments are to be delivered outside the United States and its possessions. '

Presumably you will require payment to the UK therefore outside the United States?

Also note the net estate income is also reportable in the UK for higher rate tax purposes ( you get a credit for the US tax paid at source).

Well it says "if we do not have a valid TIN" but it's not clear if our own Tax Id Number is "valid" or not for this particular question.

Also the email from the USA says "Attached are the claim forms from Prudential and American Equity for your share of <Name's> annuities, IRA and life insurance." - which I hope adds a bit of clarity?

I can't see a way to attach the forms so here is one of them with the question 9 on page 4 being the one we'd love to turn off federal and state tax! => www.effingpot.com/AEL-IRA-Claim-form.pdf

So to be clear, these are in fact benefits derived from the deceased relative's employment related benefit package ie IRA and death in service benefits?

First thing to note is all the forms  you receive from US institutions  presuppose you are American based beneficiaries.

As such SSNs and TINs are relevant to US based beneficiaries since if receiving income untaxed they can report on their own  IRS tax returns to ensure US taxable income is eventual taxed in the US if not witheld at source.

As to the form you supplied, I assume you plan to  complete section 5 at page 2 (Designated  Beneficiary ) and opt for option 3 ( lump sum payout ) ? You will have noted the suggestion in section 5  that you seek tax advice before making your choice. You should do so, since taking the lump sum may trigger excessive UK income tax based on UK rules on the taxation of IRA lump sums.

In this regard I would strongly advise you read through the recent thread below from an OP in your similar circumstances.

https://forums.moneysavingexpert.com/discussion/comment/81441184#Comment_81441184

You will note from the thread that  some form of  US withholding tax is unavoidable, but completing a W 8Ben ( as indicated in section 10 page 4 of your form) may limit the severity of a deduction which amounted to 30% suffered by the OP of that thread.  Furthermore, depending on the size of the inherited IRA you maybe better off electing for the 10 year deferral option to spread your benefit over a number of UK tax years, to limit UK taxes.

In any event, you are strongly advised to take UK advice before completing any forms, to ensure you don't fall into the same tax trap as the OP in the thread. The link to the Edale article  included in one of my posts in the thread might provide helpful insight prior to seeking specific advice.

Thank you - we've tried two UK based Tax advisors with alleged US experience and neither know how to do this. If anyone knows of someone qualified to help complete this process we're all ears. Thanks for the link - that looks like someone who may be in the know!

You might like to direct message Arcoms ( the thread OP), to see how he got on with the tax adviser he was due to meet.