ITIN for Foreign Beneficiaries of U.S. 401(k), IRA, or Pension Distributions

If you've inherited a U.S. retirement account — or if you're receiving distributions from a U.S. pension plan as a nonresident alien — you'll encounter two immediate requirements: withholding on the distributions and a need for an ITIN.

This guide explains what happens when a nonresident alien receives U.S. retirement distributions, how the tax works, and how to obtain an ITIN to file for any refund you may be entitled to.

What Happens When a Nonresident Alien Receives U.S. Retirement Distributions

U.S. retirement plans — 401(k)s, traditional IRAs, pensions, and similar accounts — are funded with pre-tax money. When funds are distributed, they're treated as ordinary income and subject to U.S. tax.

For U.S. residents, the standard withholding rate is 20% on eligible rollover distributions, 10% on periodic payments.

For nonresident aliens, different rules apply. The default withholding rate for nonresident aliens receiving distributions from U.S. retirement plans is 30%, unless:

• A lower treaty rate applies between the U.S. and your home country
• The distribution is a lump sum that qualifies for different treatment under IRC §402(b)

The plan administrator withholds before paying you and is required to report the distribution on Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding) rather than the Form 1099-R used for U.S. persons.

Do You Need to File a U.S. Tax Return?

If withholding was applied at the correct treaty rate: You may not need to file a U.S. return if all of your U.S.-source income was subject to final withholding and you have no other U.S. filing obligations.

If too much was withheld: File Form 1040-NR to claim a refund of the excess. This requires an ITIN.

If you want to claim a treaty exemption that the plan administrator didn't apply: File Form 1040-NR to claim the treaty benefit and recover the over-withheld amount.

In practice, most foreign beneficiaries of inherited U.S. retirement accounts need to file at least one 1040-NR — either to claim a refund or to formally satisfy the filing obligation.

Which W-7 Exception Applies?

Nonresident aliens receiving U.S. retirement distributions use W-7 Exception 1(d): Pension, annuity, or other passive income.

This exception allows you to apply for an ITIN without attaching a complete Form 1040-NR. The required documentation proves that you are receiving a distribution subject to reporting.

Documents required:

• Form 1042-S from the plan administrator (or a letter from the plan confirming the distribution, your name, and the withholding applied)
• Identity documentation (passport — certified via CAA for remote verification)
• Form W-7 with Reason h checked and "Exception 1(d)" written in the exception line

If you've already filed a 1040-NR: Use the standard W-7 pathway instead (Reason b or a, depending on your situation) and attach the return.

Inherited Retirement Accounts: Special Considerations

When a nonresident alien inherits a U.S. retirement account from a U.S. person (or another nonresident), several additional rules apply:

Required Minimum Distributions (RMDs): After the account owner's death, the beneficiary is generally required to distribute the account within 10 years (under SECURE Act 2.0 rules for accounts inherited after 2019). Each year's distribution triggers withholding and a potential filing requirement.

Lump-Sum vs. Periodic Distributions: Taking a lump sum in one year may have different tax treatment than spreading distributions over multiple years. A tax advisor familiar with U.S.-source income for nonresidents can help optimize the approach.

Treaty Benefits: Many U.S. tax treaties reduce the default 30% withholding rate on pension/retirement income. Common treaty rates include:

• Canada: 25% (reduced in some cases)
• U.K.: 0% (pension income exempt under Article 17)
• Germany: 15%
• India: 15%
• Japan: 20%
• Australia: 15%
• Most European countries: 0–15%

Note: The Russia-U.S. tax treaty was suspended by Russia in March 2024. Russian residents currently cannot claim treaty benefits and face the default 30% withholding rate. A 1040-NR may still be filed to confirm the withholding was correctly applied, but treaty reduction is not available.

No Treaty: If your home country has no U.S. tax treaty (many countries in Africa, the Middle East, and parts of Asia), the full 30% withholding applies and is generally the final tax — no refund is available unless the rate was applied to income that qualifies for an exemption.

The Inheritance Process: Practical Steps

Step 1: Notify the Plan Administrator

Contact the plan administrator (the bank, brokerage, or employer sponsoring the 401k) and notify them of your beneficiary status. Provide:

• Your identification documents
• Death certificate of the account holder
• Your relationship to the deceased (if required by the plan)

The administrator will process the beneficiary claim and set up distributions.

Step 2: Provide Your TIN

The administrator will need your TIN for withholding and reporting purposes. If you don't have an ITIN yet, inform them you are in the process of obtaining one. Many administrators will hold distributions briefly while you obtain the ITIN, or they may withhold at the default 30% rate and distribute anyway — in which case you'll need to file to claim any overpayment.

Step 3: Apply for Your ITIN

Use Exception 1(d) as described above. Processing takes 7–11 weeks.

Step 4: File Form 1040-NR

Once you have your ITIN, file Form 1040-NR for any year in which distributions were received. Claim applicable treaty benefits and credits for amounts already withheld. Any excess withholding is refunded by the IRS.

Step 5: Provide W-8BEN to the Administrator for Future Distributions

After receiving your ITIN, submit Form W-8BEN to the plan administrator with your ITIN entered and your treaty claim stated (if applicable). This instructs them to apply the correct treaty rate on future distributions rather than the default 30%.

How Far Back Can You Claim a Refund?

The 3-year refund statute applies. For each tax year where withholding was applied, you have 3 years from the original return due date to file and claim a refund.

Given that ITIN applications and 1040-NR processing can take 6–12+ months when you're starting from scratch, don't delay. An inherited account with multiple years of distributions can generate substantial refund claims, but they expire.

Can I Apply From Russia?

Yes. The ITIN is a U.S. tax identification number issued by the IRS based on your tax filing obligation — not your country of residence. There are no OFAC sanctions that prohibit IRS from issuing an ITIN to a Russian resident.

However:

• The Russia-U.S. tax treaty has been suspended since March 2024. Russian residents cannot claim reduced treaty rates.
• Your passport must be valid and presented to a Certified Acceptance Agent for verification.
• The 30% default withholding rate will apply unless another exemption exists.
• You can still file Form 1040-NR to confirm correct withholding or claim applicable exemptions — the suspension of the treaty affects treaty rates, not the right to file.

For residents of Iran, Cuba, North Korea, or Syria: OFAC sanctions affect financial transactions (banking, money transfers), not IRS tax filings. An ITIN can be issued, but receiving funds or refunds may involve additional compliance steps. Consult a tax professional familiar with sanctions compliance before proceeding.

Managing U.S. retirement distributions from abroad involves both ITIN and tax return complexity. We help nonresident beneficiaries navigate both. [Contact us](/apply) to discuss your situation.