I just got my copy of the ABA Bank Compliance magazine and noticed, tucked away on the last page, an article about the recently enacted Economic Growth and Tax Relief Reconciliation Act of 2001 (the Tax Cut bill).

According to the article, the rate for back-up withholding for customers who failed to provide a current taxpayer indentification number, etc., will be reduced to 30.5% effective 8/7/2001. The rate will continue to decrease in 2002 (30%), 2004 (29%) and 2006 (28%).

The article recommends that banks reduce their withholding rate to avoide time-consuming refund requests.

Was anyone else aware of this? It took me and our operations staff by surprise. Our data processor is unaware of this, and now we have to manually adjust all the accounts thus affected.

I hadn't heard of it. That is why the magazine is so good. Additionally, I haven't read the magazine yet so the first I have heard of it was your post.

Thanks.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Does anyone know when the rates for subsequent years goes into effect? Is it 8/7 of those years, 1/1? 6/30? Anyone?

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David J. Mulkerin
Opinions expressed are mine and not my employers, who gets them whether they want them or not.

The subsequent changes are for the calendar year, so they will take effect on January 1.

I just saw a good explanation on the Kirchman
website under "HOT ISSUES" explaining all the requirements. I believe we must adhere by August 1,2001 by what is stated in this article. I am glad it was on this discussion board as it would have been missed by many of us. Thanks for the heads-up.

It's 8/7. Here's the IRS reference: http://www.irs.gov/prod/forms_pubs/pubs/p15t02.htm