/ Ask Terry Questions / Federal interest withheld

Federal interest withheld

By Terry Savage on November 19, 2021 | Economy & Taxes

Every month since February There has been an automatic withdrawal from my savings account titled federal interest withheld. I have been working with Chase bank since February to find out why and if this can be stopped. I have received no notification from the government why this is happening? Chase bank can’t seem to find out how this is happening. Can you help?

Terry Says

Tell the bank not to honor the withdrawal request! If it’s something important they will come after you! Then you can ask them what it’s all about!
In all seriousness, perhaps you didn’t realize you authorized a Federal 20% tax withholding on interest you were earning in the account. The way to get out of that is to file a form W-9 with the bank, which says that you are “not subject to backup withholding” — which is probably what this is!

How do you get out of this withholding? Read the instructions here at the IRS.gov website.

If they have been doing “backup withholding” you should receive a 1099 form at the end of the year, telling you how much has been withheld already during the year. You’ll find that on line 4 of your 1099. And that reduces the tax on your interest income, because you’ve already paid that amount to the government!

money

ASK TERRY

a personal
finance question