zeekrewardsAfter the Receivership sent out the first wave of victim checks on September 30th, it wasn’t long before those who received their checks in the mail began asking about the 30% withheld for tax purposes.

No doubt inundated with requests by check recipients to clarify the amount withheld, today the Zeek Receiver has published an update on the Receivership website addressing the issue.

I want to address the question many of you are asking about why a percentage was withheld from some distribution checks.

On September 30, 2014 we mailed more than 90,000 checks to claimants as part of the first partial interim distribution. These payments were calculated to equal 40% of an accepted claim using the rising tide method of distribution previously ordered by the Court.

For those claimants to whom checks were mailed that did not provide an IRS Form W-9 (for US residents) as requested on the claims portal we withheld a certain percentage for tax purposes.

For non-US claimants a percentage was withheld whether or not an IRS Form W-8 was provided.

I have heard from many of you that this withholding should not have been made because these distributions are not taxable. The tax laws on this issue are not entirely clear.

We have attempted to get a definitive opinion from the IRS but have not yet been able to do so. Given this uncertainty we acted on the side of caution and made the withholding.

If and when we receive assurance that withholding from distributions to Affiliates is not necessary we will send additional checks to those claimants from whom a withholding was made in the first interim partial distribution in the amounts that were withheld.

For US residents, online completion of an IRS Form W-9 will allow us to send an additional check in the amount that was initially withheld. Click here to provide tax form.

In a nutshell, if you’re in the US you need to file a W-9 form, after which you’ll receive anything payable out of the 30% withheld via an additional check.

Non-US residents need to sit tight while the Receivership seeks clarification from the IRS.

If the IRS give the Receivership the all-clear, the 30% withheld from non-US claimants will be sent via additional checks.

For victims who filed a claim but didn’t receive anything, again the Receivership urges you to get your documents in order:

While I am gratified that we were able to send 90,000 Affiliates a distribution, there were approximately 48,000 claimants to whom I wanted to send a check but was not permitted to pursuant to the Court’s orders.

If you have received a letter of determination, in order to be sent your first partial interim distribution, you must accept the determination (or have had an objection resolved) and complete the release and OFAC certification provided on the claims portal.

At the end of January 2015 we will make a first partial interim distribution to those claimants with allowed claims who were not mailed a distribution check on September 30, if these steps are taken by December 31, 2014.

There’s also an update for those who were awarded less than $100 in this initial distribution:

Approximately 12,000 Affiliates with approved claims were not mailed a check because the amount would have been less than $100. It was not cost efficient for the receivership to mail these checks at this time.

At the end of the receivership Affiliates holding approved claims due a payment of less than $100 will be mailed a distribution check.

Presumably if these balances increase over the $100 threshold after subsequent distribution rounds, checks will be sent out. Failing that, once all distributions have been made, checks for balances under $100 will be mailed.

I want to re-emphasize that these distributions are the first, and partial, distributions I believe you will receive. We continue to pursue and recover additional funds that will be distributed on later dates.

Kenneth D. Bell
Receiver

Hopefully this clarifies the 30% of funds withheld for tax purposes issue for those who have been inquiring about it (non-US residents in particular).

 

Update 21st December 2014 – The Receivership has put out a new update stating that funds previously withheld for tax purposes will now be sent out on the 23rd of December.