Question about Backup Withholding on saving account

[planet]

Hello,

I have several saving accounts, and all my saving accounts don't have the Backup Withholding, since I saw the message "for most people the Backup Withholding is not selection" when I opened these saving accounts.

Now, I am thinking to change my some saving accounts to the Backup Withholding. So when I file the tax-return at the end of year, I will not owe the tax because the saving accounts interest.

But if I change my some saving accounts to the Backup Withholding now, I will have some saving accounts without the Backup Withholding and some saving accounts with the Backup Withholding. Is there any problem in this case?

Thank you!

[disneysteve]

How much money do you have in the savings accounts? It probably isn't enough to trigger backup withholding. It isn't something you would voluntarily sign up for.

[Like2Plan]

I agree with Disneysteve, it's hard to know what is the best course of action without knowing more about your situation.

There are some folks who are required to have money withheld.
More info

https://www.thebalance.com/backup-withholding-3193454

[Gailete]

I agree with Disneysteve, it's hard to know what is the best course of action without knowing more about your situation.

There are some folks who are required to have money withheld.
More info
https://www.thebalance.com/backup-withholding-3193454

That site makes it look like doing back up withholding is more of a punishment and a way to be sure that you don't avoid paying your taxes, but for regualr normal US citizens that pay their taxes as they should you don't need to do it. I wouldn't bother unless you are making oodles of interest and dividends.

When I realized that my dividends had grown enough to effect my taxes, even in a small way, I decided to send all my future deposits into my Roth IRA which lets them grow tax free. It is amazing how even small amounts can effect other tax situations, like they count as income for tax rebates in my state. Or getting the disability discount for our car registration. Until the last couple years 'dividends' was nevereven an entry on my taxes!

[Like2Plan]

That site makes it look like doing back up withholding is more of a punishment and a way to be sure that you don't avoid paying your taxes, but for regualr normal US citizens that pay their taxes as they should you don't need to do it. I wouldn't bother unless you are making oodles of interest and dividends.

Exactly, that is the point. There are some folks who are required to have back up withholding. And, as you may have noticed that there are several ways that you can be required to do back up withholding:

From the article:
When Does the IRS Require Backup Withholding?

The IRS requires businesses and financial institutions to withhold 28% of the types of income mentioned above as backup withholding when:

"You do not give the payer your TIN [taxpayer identification number] in the required manner.
"The IRS notifies the payer that the TIN you gave is incorrect.
"The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return. The IRS will do this only after it has mailed you four notices over at least a 120-day period.

"You fail to certify that you are not subject to backup withholding for underreporting of interest and dividends." (from Tax Topic 307, Backup Withholding)

[GrimJack]

Backup withholding requirements are often imposed by the IRS when you screw something up - your SS# (ITIN - individual taxpayer ID number) - this is backup withholding B

BWH-C is when you fail to report or under report interest or dividend income on your return or failed to certify you are not subject to BWH for such a failure.

see Backup withholding