How to ask my 401K management company to give me 1099-R instead of 1042-S?

Question

This question is related to Where to report 1042-S income and federal tax withheld on form 1040?

I am a U.S citizen living abroad (Taiwan). I am a 64 years old retiree and own a 401K account managed by a well-known company in the U.S.

I made 401K withdraws total amount $4500.00 last year (2015). At the time I made the withdraws, the company withheld 30% tax instead of 20%. I did not say anything back then because I thought it was just tax law change. And I know I can get the money back when I file the tax return next year.

Now, it's tax return time. I am about to file Fed Income tax return. I received 1042-S from the management company in February, 2016. Since then I called the management company asking them to give me 1099-R instead of 1042-S.

The company simply refused to give me 1099-R Their explanation is that I live in Taiwan so they must treat me as a Non-Resident Alien. I explained to them that I am a U.S. citizen regardless where I live. They seem to not understand this.

I sent them a signed W-9 form in late February(2016) and they acknowledged the receipt of that form in early March . I called them back and asked them to give me 1099-R. They still refused and the reason is the same.

I read the above linked question. I decide to use the way recommended by @littleadv 's answer, that is, check 1040 form line73 (d) when I file the Fed income tax.

However, this can only solve the tax return this year and I still have at least two problems.

• Will IRS accept 1042-S and give me tax refund? (The 30% tax withheld is about the refund amount)
• I need the company to withhold 20% tax when I make withdraws as I am a U.S. citizen.

So, my question is,

How do I ask the 401K company withhold 20% tax when I make 401K withdraws? And how do I tell that company to give me 1099-R instead of 1042-S next year and after?

Added after @Brick 's comment

I made 401K withdraws since after I was 59 1/2 years old. I never had any problem(I always got 20% tax withheld and received 1099-R the next year) until they changed to this management company which has this problem. I have a pension account which is managed by another company which gave me 1099-R for my pension income (they did ask me for W-9 in Feb., 2015 and I sent them W-9 in Feb., 2015). Both the pension management company and the 401K management company are supposed to report to my former employer (the company I retired from) retirement center. This retirement center always has my W-9 info all along. (I worked for them for many years until I retired. They do have every info about me.)

For my current problem, I have a work around, that is, the answer to the linked question. My real question is how to tell them to give me 1099-R next year and after?

Answer 1

Now that they have the W-9, the answer seems clear that they should give you a 1099-R in future years. If you want to cite the rules, the relevant paragraph seems to be at CFR 1.1471-3(d)(2)(i):

In general. A withholding agent must treat a payee as a U.S. person, including a payee that is a foreign branch of a U.S. person (other than a branch that is treated as a QI) or is an FFI that has elected to be treated as a U.S. person for tax purposes under section 953(d), if it has a valid Form W-9 associated with the payee or if it must presume the payee is a U.S. person under the presumption rules set forth in paragraph (f) of this section. Consistent with the presumption rules in paragraph (f)(3) of this section, a withholding agent must treat a payee that has provided a valid Form W-9 as a specified U.S. person unless the Form W-9 contains a certification that the payee is other than a specified U.S. person. Notwithstanding the foregoing, a withholding agent receiving a Form W-9 indicating that the payee is other than a specified U.S. person must treat the payee as a specified U.S. person if the withholding agent knows or has reason to know that the payee's claim that it is other than a specified U.S. person is incorrect. For example, a withholding agent that receives a Form W-9 from a payee that is an individual would be required to treat the payee as a specified U.S. person regardless of whether the Form W-9 indicates that the payee is not a specified U.S. person, because an individual that is a U.S. person is not excepted from the definition of a specified U.S. person. [Emphasis added]

(As of posting this March 2016, you need to move back and forth between final and temporary versions of this regulation.)

As for 2015, we can only speculate on what happened given the information provided, but it seems plausible that, when the management company changed, whatever documentation the old company had that "reliably" documented you as a U.S. person was not transferred. Absent such documentation, the "presumption rules" referenced above kick in, and it is possible that the rules would lead to the presumption that you were not a U.S. person, which would then lead to you getting the 1042-S. Filing the W-9 after the payment and after the 1042-S was issued does not appear to require them to go back and change forms if they properly applied the rules based on the information they had at the time that

You might argue that it's not your fault that the documents were lost, and you're probably right. Fighting that battle is probably not worth it though for 2015 where, as you wrote, you have a work-around. I would clarify your position for future years, and make sure that they plan to treat you as a U.S. person going forward. Filing the W-9 seems like it was the right thing to do.

Answer 2

Will IRS accept 1042-S and give me tax refund? (The 30% tax withheld is about the refund amount)

Yes

How do I ask the 401K company withhold 20% tax when I make 401K withdraws? And how do I tell that company to give me 1099-R instead of 1042-S?

Make sure they record W9 correctly and explain to whoever is authorized to listen that you may sue.

However, actually suing may not be so easy, so I'd suggest running this through an attorney. They are wrong, but there is a high chance that their incompetence coupled with the complexity of the US tax code will prevent them from admitting it and fixing this.