Recently, the IRS proposed treasury regulation, REG–132240–15, providing clarification on distributions from certain retirement plans and IRAs that are delivered outside of the United States. This regulation would clarify the guidance provided in Notice 87-7.

The proposed regulations provide the following:

  • A distribution recipient may generally waive out of mandatory federal withholding if a residence address that is located within the United States is provided, unless 1) the distribution is sent to a financial institution or person outside of the United States; 2) the distribution is sent to a financial institution or other person inside the United States with further instructions to forward to a financial institution or other person outside of the United States; or 3) the distribution is sent to a financial institution or other person pursuant to payment instructions that reference certain agencies linked to financial institutions or other person outside of the United States.
  • A distribution recipient may not waive out of federal withholding if the residential address provided by the distribution recipient is outside of the United States, regardless of where the distribution is to be delivered.
  • A distribution recipient may not waive out of federal withholding if payment instructions request that the funds be delivered outside of the United States regardless of any residential address provided.
  • A distribution recipient may not waive out of federal withholding if no residential address is provided.
  • A distribution recipient may waive out of mandatory federal withholding if a military or diplomatic post office address is provided as these addresses are considered as an address within the United States.