The Zeek Rewards Receivership announced on December 12, 2014, that it would stop withholding taxes from distributions and reissue checks for previously withheld amounts. This decision followed a period of uncertainty regarding the taxability of funds distributed to victims of the Zeek Rewards Ponzi scheme.
Victim checks initially sent out on September 30th reportedly had approximately 30% of the payout held back. The Receivership explained this withholding was a precautionary measure, pending clarification from the IRS on potential tax implications. Receivership officials stated that tax laws concerning such distributions were not entirely clear. They attempted to obtain a definitive opinion from the IRS but had not yet received a response. This lack of clarity led the Receivership to err on the side of caution to avoid potential fines and penalties that could reduce the funds available to claimants.
Despite the ongoing delay in IRS guidance, the Receivership has now decided to release the withheld funds. This action is based on a tax opinion obtained from a professional. The Receivership stated that this professional opinion persuaded them that tax withholding was not necessary. Consequently, the Receivership will no longer withhold taxes from payments made to affiliates.
New checks for the previously withheld tax amounts are scheduled to be issued on December 23, 2014. On the same date, the Receivership will also reissue other checks that were deemed problematic from the initial distribution batch.
The Receivership also highlighted that further distributions are planned for late January 2015. These distributions will go to qualified affiliate claimants who completed the online claim allowance requirements after August 15, 2014, and have not yet received a check.
A significant number of affiliate claimants, close to 62,000, had received a letter of determination but had not yet formally accepted or objected to their recognized claim. Funds are available to distribute to all these claimants, mirroring the process used for the approximately 90,000 affiliate claimants in September. However, a distribution check cannot be mailed unless a claim is accepted or an objection resolved, and the affiliate claimant completes the necessary release and OFAC certification forms.
Affiliate claimants in this category are strongly encouraged to log in online and complete the required process to become eligible for a distribution check in late January 2015. This step is crucial for them to receive their allocated funds from the receivership.