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Guidelines

por Adrian Mikeliunas

 

Tax Handbook (English Only) and

Tax on Pension Frequently Asked Questions

Deloitte F.A.Qs
 
IDB FATCA Notice

 


All individuals who receive an IDB pension (not to include withdrawal benefits) as a retiree, surviving spouse, or surviving dependent under the IDB Staff Retirement Plan are subject to tax laws of their country of citizenship or residence and are eligible to receive tax reimbursements from the IDB.

For further information, please contact the IDB Deloitte Tax Team (202) 623-2766 or via email  [email protected].

Reimbursement Process

The approach used by the Bank in calculating tax reimbursements for retirement income is similar to that currently used for the reimbursement of U.S. Federal and State income taxes on Bank income. The calculation utilizes itemized deductions and personal exemptions reported by the retirees on their tax returns and such deductions and exemptions are allocated proportionally to all sources of income, including retiree outside income. Spouse income is also taken into consideration to determine the effective tax rate.

The tax reimbursement procedure consists of a two-step process in which first, tax reimbursement payments are advanced to the retiree based upon information submitted from the retiree; and secondly, a settlement process is performed after tax returns have been filed. Because the advances are based upon estimates and because the retirees will establish their right to tax reimbursement only at settlement, tax payments are treated as advances and will not be reported as taxable income in the year of receipt. The amount of the settlement will be reported as taxable income in the year the settlement calculation is completed.

Reimbursement Steps

Step 1 – Payment of Tax Advances

In the initial year that a retiree becomes eligible for tax reimbursement on retirement income, a request may be made to the Bank for advance payments for anticipated taxes as a result of their IDB retirement income. This request will be made by submitting to the Bank an IDB Tax Form 1R to estimate the necessary tax reimbursement. Upon review and approval by the Bank, quarterly tax advances will be made to the retiree to cover the anticipated tax liability.

Step 2 – Tax Settlement

Because payment of tax advances will be made based upon estimates and the final reimbursement calculation will take into account actual tax return information relative to spouse income, retirement income, outside income, itemized deductions and personal exemptions, retirees who receive tax advances will be required to submit their tax returns to the IDB or a third party designated by IDB to perform the settlement calculation.

Retirees will provide the requested appropriate information which will include a copy of the tax return(s) as filed together with a completed Settlement Request (IDB Tax Form 7R).

Settlement Requests (IDB Tax Form 7R) must be submitted each year for which tax advance payments are made by the Bank. After tax returns for such years have been prepared, these requests must be submitted to the IDB or a third party designated by the IDB by the first week in July. If this deadline cannot be met, an explanation for any delay in meeting the deadline should be promptly sent to the IDB or to the designated third party.

For further information, please contact the IDB Deloitte Tax Team at (202) 623-2766 or via email  [email protected].

Reimbursement – Filing Status

The following are the procedures and criteria used by the Bank to calculate your tax reimbursement based on your marital status.

1. Married retirees. The Bank will base the tax reimbursement calculation on the status of “married filing jointly”. Please note that this position is for IDB reimbursement purposes only. The retiree is still at liberty to file his/her federal and state tax return in the manner that they deem appropriate.

In exceptional cases retirees may present a request, in writing, to the Division Chief, Compensation, Benefits and HR Services to authorize that the tax reimbursement be calculated using “married separate filing” status, if one or more of the following reasons is presented:

  • Using “married separate filing” status produces a lower tax reimbursement than using married filing jointly status;
  • The retiree’s spouse is not a U.S. tax resident but would become a U.S. tax resident if the spouse and the retiree filed joint tax returns; and/or
  • The retiree is unable to file joint tax returns with the spouse due to difficult marital circumstances, including legal separation or pending divorce.

Any request approved will be valid only for the corresponding tax year. Requests for “married separate filing” status must be re-applied on a yearly basis and comply with the requirement/s described above.

2. Unmarried retirees. The Bank will use the actual filing status of the individual. If an unmarried retiree has dependents, the retiree may be asked to consider filing using “Head of Household status”, if eligible.

To ensure timely reimbursement under the appropriate filing status, requests for exceptions should be sent to [email protected] no later than February 28 of each year and will be answered by March 30. All other requests will be handled upon receipt and will be reviewed within 4-week period.