ITIN/US TAX ID for Foreign Person – Beneficiary Claims
Form W7/ITIN application for the Beneficiary of the US 401K plans
Pension Beneficiary Claims by Foreign Person
If you the beneficiary of the US IRA Accounts or 401K Plan of a US Citizen/ Resident Alien in the United States who is now deceased and he has named you as one of the beneficiaries of the pension distribution plans you would require an ITIN or US Tax ID
Often you would have been contacted by United States Investment brokerage firms for example beneficiary specialist team from Fidelity, TIAA Charles Schwab, or other firms requesting you to complete a Form W8 BEN Please note to complete this form you need a valid US TAX ID
In order to apply for ITIN – You would need a letter from the US-based firms addressed to the IRS ITIN office clearly stating that you are the beneficiary of the deceased person’s estates this letter should include the deceased name and should state you need to apply for the ITIN which is the first and important step because the US firms will not release the amount until the ITIN number and Form W8 BEN is completed.
While some firms may distribute the money by withholding 30% of Federal tax and releasing the balance of 70% and later in the following year will issue a Form 1042S or Form 1099 or Form 1099-R. It’s highly recommended not to ignore these forms as by filing the correct US Nonresident tax return you can claim back the excess taxes paid to the American revenue.
Let’s say for example the 1042S or 1099 Form says the distribution amount to be $10,000 and 30% tax withheld [$3000], well the correct tax rate in this scenario is only 10% of $10,000 which is about $1000 and until you file the US tax return with valid ITIN you will not be in the position to claim back the excess tax [$3000-$1,000] = $2000 tax paid via the 1042S or 1099
For more information on who requires an ID please refer to our earlier blog
Please note even though the Form W7 ITIN application looks simple and straightforward to complete any small mistake would lead to rejection. As the ITIN application process time is estimated to be between 6 to 12 weeks at peak tax season time you could potentially waste a lot of time and risk the process of losing the original passport which is mandatory if you are sending the Form W7 application directly without using an Acceptance Agent service. For more details on the step-by-step ITIN application work process by acceptance agents please check this blog.
Our team specializes in international expatriate U.S. personal tax return services. If you need assistance with ITIN Renewal/US 1040 filing for refund claim/FATCA Compliance work/FBAR FINCEN114 Filing, ITIN/ Form W7 Application/E.I.N./Form W8BENE or Certified Acceptance Agents [C.A.A.] services/1040NR U.S. tax filing for refund claim of excess 1042S / 8288A/ 8805/ W2/ 1099. We are happy to assist our clients in a timely, efficient, and cost-effective way
