Common use of Tax Withholding Election for Conversion Clause in Contracts

Tax Withholding Election for Conversion. Under IRS rules, a conversion of a Traditional IRA to a Xxxx XXX is treated for income tax purposes as a distribution of taxable amounts in the Traditional IRA. IRS rules also require the custodian to withhold 10% of the conversion amount for federal income taxes unless no withholding has been elected. See IRS Publication 505, Tax Withholding and Estimated Tax for more information. State tax withholding may also apply if federal income tax is withheld.

Tax Withholding Election for Conversion. Under IRS rules, a conversion of a Traditional IRA XXX to a Xxxx XXX is treated for income tax purposes as a distribution of taxable amounts in the Traditional IRAXXX. IRS rules also require the custodian to withhold 10% of the conversion amount for federal income taxes unless no withholding has been elected. See IRS Publication 505, Tax Withholding and Estimated Tax for more information. State tax withholding may also apply if federal income tax is withheld.