Withholding on distributions to nonresident beneficiaries of Indiana trusts and estates

Authority: IC 6-8.1-3-3

Affected: IC 6-3-4-15 ; IC 6-3-6 ; IC 6-8.1-10

Sec. 113. Withholding on Distributions To Nonresident Beneficiaries of Indiana Trusts and Estates. Beginning January 1, 1978, Indiana trusts and estates distributing income subject to withholding to nonresident beneficiaries are required to withhold adjusted gross income tax from such distribution. "Income subject to withholding" is defined as all income subject to adjusted gross income tax, except interest and dividends. An allowance is made for expenses, administrative fees, a personal exemption, and other allowable adjustments. Examples of income subject to withholding include farm income, business income, and rents and royalties from Indiana real estate.

These withholding provisions apply only to distributions to nonresident beneficiaries. A beneficiary's residency should be determined at the time of distribution. However, if a resident beneficiary later becomes a nonresident, the fiduciary is required to withhold on all subsequent payments to that beneficiary. Part-year residents and nonresidents should take credit on their adjusted gross income tax returns for any tax withheld.

The withholding rate for these fiduciaries is two percent (2%). Any deficiency in taxes withheld and remitted to the state will subject the trust or estate to the penalties and interest imposed by IC 6-3-6 . The Department may, at its option, require the withholding agent to post a bond to ensure payment of the tax.