Zeek Receiver addresses 30% tax withheld from payouts
After 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
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.
Thank you so much for posting this! Myself and a lot of my friends that lost money in this deal and made no money were really confused about the 30%.
I read over the original directions thoroughly and read nothing about providing a W-9. It was definitely not clear.
You’re welcome, glad you found the information useful.
I know about 10 people including myself who got checks and no tax was with held. It was there on the receiver claims portal but I do agree, it was not the most clear so I can see where some people maybe missed it.
Here is what I do not understand. If the receiver with held 30% for taxes, shouldn’t they be forwarding this on to the IRS and those people who did have the tax with held can take a credit on their tax return?
From the sound of it, they are still sitting on that with held tax and once they get a definitive answer from the IRS, they may return it to those whom it was taken from.
In regards to the for the people outside the USA, it sounds like the 30% tax was with held. From the little I read, those people have to fill out an IRS W7 applying for an ITIN number and then file an IRS 1040NR (Non Resident) essentially showing zero income but claiming the tax that was with held and then if there is a tax treaty between their country and the USA, they might get it back.
If anyone can shed any light on this it would be very helpful. I have seen a number of people outside the US who had tax with held wondering if they can get this back.
I do have one other comment. I have read the receiver website over and over. All references to taxes being with held have all stated this is IRS law that if you did not fill out the form properly on their claims site they were required to with hold taxes.
Now they are saying that they have not got a clear answer from the IRS and are erring on the side of caution. I know the IRS has been busy deleting emails, but certainly this should have been cleared up a long time ago.
If it had been clear, many more people would have posted something about it long time ago, as replies to questions about it. The number of unfinished claims would have been much lower than 48,000.
The current update from the Receiver is the first relatively clear information I have found, and I have tried to find clear information 8-10 times since May 2013 via the Receivership’s website. I haven’t had any access to the claims portal.
The initial information (April or May 2013) mentioned vaguely something about OFAC and tax forms, enough to inform outsiders that “something” had to be sent in to avoid taxes. It didn’t clearly separate between U.S. citizens and foreign citizens, it focused mostly on the claims process itself.
CLAIMS DETERMINATION (48,000 AFFILIATES)
The information in early 2014 gave the impression that people ACTIVELY had to dispute the claim determination within 3 months, i.e. that they didn’t need to do anything if they accepted it.
The court seems to have decided otherwise. 48,000 claims are missing “I accept the determination” or to have a dispute resolved. Some of them may miss the OFAC certification too.
If fixed before December 31 2014, checks will be sent at the end of January 2015.
I believe for US citizens they are following that form, and if no form was filed they are withholding all 30%.
There’s probably a cutoff date where if they don’t receive the file they’ll send the held amount to the IRS.
As I understand it this is for non-US citizens.
As I read it, they don’t have to do anything but wait for the Receivership to receive clarification from the IRS. Non-US citizens don’t have to file anything additional at this stage.
If the IRS request w-8 forms then I imagine the Receivership will communicate as such.
I actually got 3 different tax forms from the receiver.
First way back when it all ended I got one claiming I had to pay taxes on money earned which I never took out any money but it claimed because I could have it was considered an income.
The second was claiming I owed a different amount, and the third again claims I own another amount.
I never took one dollar from the Zeek thing and only put in a few hundred.
I also never even made a claim to get my money back, just wanted the whole ordeal to go away.
Wow, that is incredible. I do have to ask though. You say you got something from the receiver when it all ended. I assume that what you mean is when Zeek ended.
I really find it odd that the receiver actually sent anything out that early on claiming you had to pay any sort of taxes. Are you sure it was not from Zeek themselves? I know in the Zeek back office towards the end, people could see their 1099 preliminary forms.
As far as the second and third things you are talking about, what ever those documents were, it sounds to me like maybe who ever sent that to you had you confused with someone else perhaps.
BTW, thanks for not making a claim, more money for those of us who did. Best of luck to you.
In a nutshell …
Several hundreds (or more) of the 2012 1099-misc tax forms sent to the tax payers had some flaws.
* Monies clawed back from frozen NXpay e-wallets were reported as income.
* Failed / stopped checks were reported as income.
The problem was first identified in “Quarterly report, first quarter 2013”, and similar problems have been identified in every quarterly report after that (I haven’t checked after Q1 2014).
The 2011 1099-misc tax forms were all flawed = they included “phantom payouts” to the back office (the payouts people used to buy more sample bids).
M_Norway…thank you. I was not aware that a 2012 1099 was sent out to people who did not make any money in Zeek. None of the folks that I know who did not make any money got a 1099.
I thought Erik said he did not make any money. I assume he must have fell into one of those categories. Thanks again.
I don’t know anything about Erik’s story, but it’s most likely correct. The Receiver has sent out amended tax forms for tax years 2011 and 2012 – between April/May 2013 and April/May 2014 (the last report I checked).
The problem is often that we have too much information, so it won’t fit into a nutshell. The 2011 tax forms had appr. $108 million in falsely reported income to affiliates (probably limited to affiliates in the U.S., but that wasn’t specified).
Any updates from the IRS on the 30% witholding issue?
Nope. The last update from the Receiver was dated November 25 2014. That specific tax issue was still unanswered in that update.
Last paragraph of the update:
Nothing I’ve seen. Receivership will update their website no doubt when they have news.
Wondering if someone can help me out with the whole OFAC deal?
I have had a accepted determination and did the tax form. Everyone said that their is a box to check for the OFAC release, I have not found this anywhere back in my claims portal, and now they quit responding to emails.
It says no further info is needed. Please give me some insight on this issue? I keep getting the same answer to check this box!! Ahhhh!! Was hoping new receiver update would answer this.
Article updated with news that previously withheld funds will now be sent out.
I got a check on Sept 30 but my check was only 40% of what I put in. Can someone please clarify this for me?
I thought they were only supposed to take 30% but they really took 60%. What I see is they they are holding on to people’s money so they can make interest on it. I may be wrong.
It’s only the first payment. You’re not going to get 100% of what you invested mind.
(Ozedit: Please see December 21st update at the end of this article.)
I know that I not going to get all my money! It has been proven because I did everything that was required and I only 40% and have not received anything else!
In the mean time there is people that I know that did not get hardly anything withheld.
I don’t get what the difference between them and me. Like I said before, this is all about making money with interest! Point blank period!!!
What needs to happen is the irs needs to tax the people withholding grudges the money.
Don’t panic, Delia, what you have received is an “interim part payment”
The receiver is doing payments in stages as more money is reclaimed.
I suggest you read through the receivership website NOLINK: zeekrewardsreceivership.com/ to keep up to date with what is happening
Subsequent payments will be made at a later date. How much you get back is determined via your claim, with each claim processed individually.
Without know the specifics of your investment activity in Zeek Rewards (and even then, your version might not match up with what you actually did on paper), it’s impossible to analyse your claim.