Vanguard paying dividend taxes (taxable account)

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era00100
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Joined: Mon Feb 18, 2019 12:47 am

Vanguard paying dividend taxes (taxable account)

Post by era00100 »

Does anyone know if it is possible for Vanguard to automatically withdraw taxes on dividends in a brokerage account?

Also, if this is possible, would Vanguard then report that these taxes were prepaid somewhere on the 1099?

Lastly, if Vanguard does list the prepaid taxes on the 1099 - has anyone done all of these steps, and then used Turbotax? If so, did it all import all of the prepaid taxes properly and was aware that you owed less than you otherwise would have had you not prepaid?

Thanks for the help.

ERA
Makefile
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Re: Vanguard paying dividend taxes (taxable account)

Post by Makefile »

It is possible, but it exists as a punishment mandated by the IRS for those who underreport investment income or don't give a correct SSN to the payer.

Even if you were able to get Vanguard to do this (by wrongly telling them you are subject to backup withholding) states generally don't have it, I believe.

What is it you are trying to accomplish?
Topic Author
era00100
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Re: Vanguard paying dividend taxes (taxable account)

Post by era00100 »

I am trying to determine if there is a system of paying taxes on dividends other than just extra withholdings on my work W2.

I believe the other option is to send the IRS checks directly, but from what I have read, come tax time it is on the person paying the taxes to keep track of what was paid. I was thinking it’d be convenient if Vanguard did it automatically.
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petercooperjr
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Re: Vanguard paying dividend taxes (taxable account)

Post by petercooperjr »

Adding more withholdings from your normal wages is the typical and probably easiest way to handle it.

You may be able to get Vanguard to do withholdings from your dividends, but you probably need to call them up and ask and it might take a bit to find the person who knows how to set it up for you, if they can do it at all. As "Makefile" says, it's something they need to do in cases where the IRS tells them to, so there must be some way in their systems to do it, but it might not be something you can just ask for. And if you get it set up in their system it might be hard to change it back if you change your mind.

If they do withhold taxes from your dividends, it would be reported to you on 1099-DIV box 4, which you would then report with the rest of your withholdings on the 1040. No idea if Turbotax would "import" it, but I'd expect that if you put that number from the box into the right place wherever you enter the 1099-DIV it'd work out how to get it onto the 1040.
livesoft
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Re: Vanguard paying dividend taxes (taxable account)

Post by livesoft »

era00100 wrote: Mon Feb 22, 2021 9:58 pm I am trying to determine if there is a system of paying taxes on dividends other than just extra withholdings on my work W2.

I believe the other option is to send the IRS checks directly, ....
You do not have a send a check to the IRS. The IRS will accept ACH payments through its IRS Direct Pay feature almost anytime you want to send them money in your name.
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Wiggums
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Re: Vanguard paying dividend taxes (taxable account)

Post by Wiggums »

era00100 wrote: Mon Feb 22, 2021 9:58 pm I am trying to determine if there is a system of paying taxes on dividends other than just extra withholdings on my work W2.

I believe the other option is to send the IRS checks directly, but from what I have read, come tax time it is on the person paying the taxes to keep track of what was paid. I was thinking it’d be convenient if Vanguard did it automatically.
If there's any question about how much you paid, you can use any of those records to confirm that you made a payment. If you misplace your records, you can also get records from the IRS payment portal of how much you've paid in tax in this year and prior recent years. If you used the electronic system, you can access up to 16 months of records online or by calling customer service.
Topic Author
era00100
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Joined: Mon Feb 18, 2019 12:47 am

Re: Vanguard paying dividend taxes (taxable account)

Post by era00100 »

Thanks all, the online IRS payment system sounds like a good solution.

Has anyone done this, and then included this information on their filing using TurboTax?
livesoft
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Re: Vanguard paying dividend taxes (taxable account)

Post by livesoft »

era00100 wrote: Tue Feb 23, 2021 9:24 amHas anyone done this, and then included this information on their filing using TurboTax?
I have made payments with Direct Pay and included those payments in my tax-prep software which is HRBlock. Maybe you are asking if you can "import" the payments from the iRS web site. The answer is "No, you have to manually enter the amount of payments you have made. See Form 1040 Line 26."
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MrDrinkingWater
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Re: Vanguard paying dividend taxes (taxable account)

Post by MrDrinkingWater »

era00100 wrote: Tue Feb 23, 2021 9:24 am Has anyone done this, and then included this information on their filing using TurboTax?
If you go to "Forms" mode, enter the estimated tax payments on the Tax Payments Worksheet.

If you go to "Easy Step" mode, enter the estimated tax payments in the "Estimates and Other Taxes Paid" step, in the subsection "Estimates."
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JoMoney
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Re: Vanguard paying dividend taxes (taxable account)

Post by JoMoney »

era00100 wrote: Tue Feb 23, 2021 9:24 am Thanks all, the online IRS payment system sounds like a good solution.

Has anyone done this, and then included this information on their filing using TurboTax?
If you're paying via an "estimated tax payment", yes done this while filing with TurboTax.
I payed via credit card
https://www.irs.gov/payments/pay-your-t ... redit-card
because at the time the fee was only 1.8% and I got 2% cash-back reward from the card.

After paying I got a receipt, and when Turbo Tax asks if I made any "estimated tax payments" I say yes and fill in the amount(s) paid.
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