Question on federal withholding in savings account

Dixiechick · #1 (**permalink**) 05-06-2008, 01:22 PM

I have a capital one savings account. I just looked at my statement and Cap. 1 withheld over $8 for federal tax withholding. What is this? Is this a new thing to have savings debit for federal tax withholding on interest???? I've never seen this before. Am I missing something here?

disneysteve · #2 (**permalink**) 05-06-2008, 01:25 PM

I've also never heard of a savings account withholding taxes. I would call and ask about it and let us know what they say.

Did you have the account in 2007? If so, did they do it then and did you get a 1099?

Dixiechick · #3 (**permalink**) 05-06-2008, 01:30 PM

Quote:

Originally Posted by disneysteve

Did you have the account in 2007? If so, did they do it then and did you get a 1099?

No, I had a MMA with them the last several years. When the rates tanked, I transfered all my money over to their savings account because the rates were better. This is a first time they've done this to me. I've sent them a message for an explanation and to elect not to have them withhold taxes. We'll see what they say. I may be shopping for a new savings account if this is their standard practice.

Anyone know who has savings rates of 3.75% or better?

Thanks!

disneysteve · #4 (**permalink**) 05-06-2008, 01:42 PM

Quote:

Originally Posted by Dixiechick

Anyone know who has savings rates of 3.75% or better?

Countrywide is paying 4.0% APY on balances of $10,000 or more.

Dixiechick · #5 (**permalink**) 05-06-2008, 01:52 PM

Quote:

Originally Posted by disneysteve

Countrywide is paying 4.0% APY on balances of $10,000 or more.

I saw that on bankrate, but I'm not too comfortable with handing them my money just yet. Aren't they in financial trouble or close to it?

Thanks!

safari · #6 (**permalink**) 05-06-2008, 10:55 PM

Quote:

Originally Posted by Dixiechick

I saw that on bankrate, but I'm not too comfortable with handing them my money just yet. Aren't they in financial trouble or close to it?

Thanks!

As long as your deposit doesn't exceed $100K, your money is FDIC insured. If a bank goes bankrupt, you will have your money back within 1-2 weeks. I've had my money at Countrywide for about a year, and can recommend them. The rates and service have been outstanding.

noppenbd · #7 (**permalink**) 05-07-2008, 05:37 AM

Quote:

Originally Posted by safari

As long as your deposit doesn't exceed $100K, your money is FDIC insured. If a bank goes bankrupt, you will have your money back within 1-2 weeks. I've had my money at Countrywide for about a year, and can recommend them. The rates and service have been outstanding.

From what I have heard it is more like 1-2 days once the FDIC steps in.

Also, you really should not have more than $90K or so at one bank per SSN to cover the interest that has not yet been paid (this is according to Clark Howard).

noppenbd · #8 (**permalink**) 05-07-2008, 05:40 AM

Quote:

Originally Posted by Dixiechick

I have a capital one savings account. I just looked at my statement and Cap. 1 withheld over $8 for federal tax withholding. What is this? Is this a new thing to have savings debit for federal tax withholding on interest???? I've never seen this before. Am I missing something here?

I believe this is called "Backup Withholding" and it usually is not done unless special circumstances apply. From the IRS website:

Tax Topics - Topic 307 Backup Withholding

Maybe you did not give them your correct SSN when you opened the account?

Dixiechick · #9 (**permalink**) 05-07-2008, 08:08 AM

Quote:

Originally Posted by noppenbd

Maybe you did not give them your correct SSN when you opened the account?

I checked the paper work they sent me for my personal info. Everything is correct. I don't understand, but I do have a message in to them about it. They haven't responded back yet...

Thanks

disneysteve · #10 (**permalink**) 05-07-2008, 08:10 AM

Quote:

Originally Posted by noppenbd

I believe this is called "Backup Withholding" and it usually is not done unless special circumstances apply.

I thought of that but wasn't sure how that worked. I know many times when I've filled out paperwork for things there was a question asking if I am subject to backup withholding. I always check no. OP, did you accidentally check yes when you opened the account?

Aleta · #11 (**permalink**) 05-07-2008, 08:18 AM

I agree with Steve. When you open an account, you are asked if you are subject to backup withholding and maybe you accidentally marked yes. Some people don't pay attention to this.

I would call and stay after that. They make mistakes too. You don't want to be paying the IRS $8.00 in advance every month instead of at the end of the year.