I have a plan with a number of employees from India. Many of these employees have named a relative in India as their primary beneficiary. Recently, one of the employees died. His Beneficiary Designation Form names his mother, who lives in India, as his primary beneficiary.
The company asked how to pay the mother. I told them she needed to get a temporary tax ID so Uncle Sweets can get his tax money first. The company thinks this process is arduous and have not asked the mother to get the temp tax ID.
Is there something bigger, better, faster than the process I've suggested that you know of?
Thanks for the help.
Full Version: Payment of Death Benefits to Foreign National
01. An income tax treaty exists between United States and India. Article 20 provides that private pensions be taxed by India for a taxpayer resident in India.
Link: http://www.irs.gov/pub/irs-trty/india.pdf, p-21:22
02. To qualify as a pension distribution from a U.S. plan the employee must have been either employed by the same employer for five years or be at least 62 years old at the time of the distribution. In addition, the distribution must be made either (A) on account of death or disability, (B)….
Link: www.irs.gov/pub/irs-trty/usmtech.pdf, p-53:54
03. IRC Section 894 states that the provisions of this title shall be applied to any taxpayer with due regard to any treaty obligation of the United States which applies to such taxpayer.
Although a TIN would be nice, by virtue of 03 above it cannot be a “must have”. It appears that if conditions are satisfied, a check can be issued to the beneficiary.
Link: http://www.irs.gov/pub/irs-trty/india.pdf, p-21:22
02. To qualify as a pension distribution from a U.S. plan the employee must have been either employed by the same employer for five years or be at least 62 years old at the time of the distribution. In addition, the distribution must be made either (A) on account of death or disability, (B)….
Link: www.irs.gov/pub/irs-trty/usmtech.pdf, p-53:54
03. IRC Section 894 states that the provisions of this title shall be applied to any taxpayer with due regard to any treaty obligation of the United States which applies to such taxpayer.
Although a TIN would be nice, by virtue of 03 above it cannot be a “must have”. It appears that if conditions are satisfied, a check can be issued to the beneficiary.
Even though a treaty exists between the U.S. and India, an individual must certify that he or she is eligible for its benefits. One cannot simply demand tax free payments (i.e., no federal tax withholding) from a U.S. payor without certifying that he or she is a bona fide resident of India entitled to treaty benefits. This is usually done via a Form W-8 or Form 8233.
QUOTE (Cliff Langwith @ Dec 27 2005, 10:48 AM) 
I have a plan with a number of employees from India. Many of these employees have named a relative in India as their primary beneficiary. Recently, one of the employees died. His Beneficiary Designation Form names his mother, who lives in India, as his primary beneficiary.
The company asked how to pay the mother. I told them she needed to get a temporary tax ID so Uncle Sweets can get his tax money first. The company thinks this process is arduous and have not asked the mother to get the temp tax ID.
Is there something bigger, better, faster than the process I've suggested that you know of?
Thanks for the help.
The company asked how to pay the mother. I told them she needed to get a temporary tax ID so Uncle Sweets can get his tax money first. The company thinks this process is arduous and have not asked the mother to get the temp tax ID.
Is there something bigger, better, faster than the process I've suggested that you know of?
Thanks for the help.
Cliff, what happen to non-spousal death benefit, not subject to 20% withholding.
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