Why Is This Form Necessary? Substitute IRS Forms W-4P and W-9

February 27, 2018

Have you been caught here? You work with a client to complete a distribution form in order to withdraw funds from their annuity contract. You submit the form and request a rush in processing. Soon after, you receive a phone call from The Standard requesting a Substitute IRS Form W-4P and W-9 (Form 5031) prior to disbursement. The result is frustration for both you and your client. What is this mystery form required for all disbursements from an annuity policy?

The Standard requires a verified taxpayer identification number (TIN) for any disbursement of funds, as well as for various other actions. Form 5031 provides this verification. In situations where we don't have a verified TIN, the IRS may require us to do backup withholding on the disbursement. We require Form 5031 when the TIN on the request hasn't been verified by an IRS form W-9 or by a Form 5031 submitted with a previous distribution request. Once the taxpayer's TIN is verified, this part of the form is not required again.

The second use of this form is to provide tax withholding information. When The Standard receives a disbursement request where the TIN has already been verified and no Form 5031 is included or on file, the default is to withhold Federal taxes and any applicable state taxes. If your client does not want taxes withheld from their disbursement, it is extremely important that Form 5031 is submitted with the distribution request.

The following is a list of situations where a Form 5031 is required:

  • Surrender
  • Partial Withdrawal
  • Scheduled Payments
  • Annuitization
  • TSA Loans
  • Transfer/Rollover/Exchange
  • Change of Ownership
  • Change of State Residence when receiving scheduled payments
  • Death Claims

For your convenience, Form 5031 is bundled with distribution request forms. If you have any questions about tax forms, please contact our Client Communication Specialists at 800.247.6888 or Send Us a Message.

 

More About Producer Advisories
Have clients in another state or looking to expand your book of business? We’re implementing a new cross-border sales policy. Check out the ins-and-outs and do’s-and-don’ts of the new policy and forms before you get down to business.
It’s time to send out the 2023 IRS Form 5498 for IRA Contributions. Be sure to notify your clients who should expect them and find out the dates we’re sending them out.
Many clients count on receiving their annuity payments on specific dates so they can pay bills and meet day-to-day living costs. Electronic Funds Transfer is the best way to ensure payments on time, every time.
Please review this recent compliance alert: New Hampshire INS 305, Suitability of Individual Annuity Sales Recommendations.
We’re always looking to improve the customer experience. Thanks to your feedback, we’re rolling out new options for annual interest payments. See how these new features work.
We mailed IRS Form 1099-R in February to clients who took a distribution last year. You can view and download 2023 and prior year tax forms on the Annuity Portal.
Required Minimum Distribution notifications were mailed out at the end of January. Here’s the rundown on who we sent them to and what to expect.