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#709035 - 03/30/07 12:13 AM Backup Withholding Question
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Wondered if anyone else has had this experience. I've done some reading in the IRS publications but can't find anything that addresses this specifically. We have banks reversing withholding entries for particular dates of the prior year and sometimes for the entire prior year as well as adding withholding. It appears the customer has gone to their tax accountant and the accountant has advised to make the change. The bank has to adjust the customer's account, redo a 1099 and sometimes the 945 tax form that has already been filed with the IRS for the bank has to be resubmitted to ask for a refund due to the change. Is there any guidance on how many times someone can change their backup withholding in a year? Thanks.

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#709108 - 03/30/07 01:33 PM Re: Backup Withholding Question Jan94
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,333
Galveston, TX
I'm confused - backup withholding on a customer's account is only required when mandated under the IRS regulations and the amount of withholding is also specifically mandated. Why would a bank ever adjust the backup withholding on an account unless the withholding was done in error?? If you are allowing voluntary backup withholding - I would recommend that you quit the practice and require the customer to pay their own estimated taxes.
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#709374 - 03/30/07 05:24 PM Re: Backup Withholding Question rlcarey
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Thank you that's what I needed. to know. This is not an area of expertise for me so I appreciate your comments.

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#709682 - 03/31/07 06:21 PM Re: Backup Withholding Question Jan94
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
In the early 80's Congress passed a law that required banks to withhold on all interest payments. The banking industry (and the general public) raised such a furor that it was repealed. Now, some banks do it voluntarily.

I understand rlcarey's repugnance at the idea and am thoroughly appalled that any bank would be pliable (there are more accurate adjectives) enough to amend prior withholdings and official reports at a customer's request.

Nevertheless, if your bank is going to serve as a customer's bookkeeper and voluntarily do the backup withholding I suggest you:

* get written, signed instructions,
* impose a significant annual fee,
* impose another fee for any change in the percentage requested and
* throttle anyone who thinks you are going to amend previous actions.

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