Easily Meet Your IRA Withholding Notice Requirements


by Lisa Walker, CISP, CHSP

Income tax withholding is a major area of compliance for IRA trustees and custodians. Unfortunately, there is a lot of confusion about fulfilling withholding requirements. As a result, numerous errors can occur or requirements may be neglected altogether, putting your organization at risk for noncompliance, not to mention undue stress and costly IRS penalties.


By not satisfying the IRA withholding notice requirements, your organization could be obligated to pay the IRS $10 per failure. While $10 may not sound like a lot, numerous failures throughout the year (and the years after that) can add up quickly. Say, for example, that your organization failed to satisfy the notice requirements for 250 IRAs. That could add up to as much as $5,000 in penalties if those IRA owners or beneficiaries required more than one notice per year. 

On top of that, if your organization does not withhold the right amount or does not withhold at all, it may be stuck footing the bill for the amounts that should have been withheld and remitted to the IRS. Even failing to maintain the necessary records for reporting withholding to the IRS could cost you $50 per IRA.

It’s easy to see how meeting IRA withholding requirements can be a daunting concern for your organization. Perhaps no one person at your organization is overseeing these duties, making it difficult to ensure that they are consistently being met. Or perhaps your IRA system does not have the functionality to handle withholding. You may be wondering if there is a simpler, more reliable way to carry out your withholding obligations and still control the risk of noncompliance—without a huge expenditure of time and money.

Ascensus' IRA Withholding Notice Mailing Service may be the solution. 

Ascensus will mail an IRA Withholding Notice and Election form twice per year to your account owners and beneficiaries who are receiving scheduled annual payments. The form serves as both a withholding notice and as an election form. As such, this one simple document explains why your IRA owners and beneficiaries are receiving the notice, provides the IRS-required notice information, and allows them to review and change their withholding elections. 

Contact customersupport@ascensus.com to learn more about this service.

If your organization happens to be a Fully-Administered Program client, call 800-356-9140, or select "IRA Withholding Notice Mailing" from the Maintenance Tools section on the IRAdirect® homepage to enroll.