Dividend Tax Withholding at Vanguard?

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bertilak
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Dividend Tax Withholding at Vanguard?

Post by bertilak » Sat Jun 23, 2018 5:02 pm

Can Vanguard be set up to withhold taxes on dividends?

I think the answer is "no" because I could not find anything on their website, other than withholding taxes on RMDs.

But, perhaps I am wrong, so I put the question here. I will also give them a call Monday.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

dharrythomas
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Re: Dividend Tax Withholding at Vanguard?

Post by dharrythomas » Sat Jun 23, 2018 7:39 pm

You can do it, but they make it hard if you said you weren't subject to backup withholding when you opened your account (unless things have changed). I asked about it years ago and they said something about a signature with a medallion guarantee for all owners of the account.

I suspect it is harder than a standard transaction because it is an individual cost, but it should be simple and they should be set up to withhold taxes on RMDs and for those subject to backup withholding.

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bertilak
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Re: Dividend Tax Withholding at Vanguard?

Post by bertilak » Sat Jun 23, 2018 7:52 pm

dharrythomas wrote:
Sat Jun 23, 2018 7:39 pm
You can do it, but they make it hard if you said you weren't subject to backup withholding when you opened your account (unless things have changed). I asked about it years ago and they said something about a signature with a medallion guarantee for all owners of the account.

I suspect it is harder than a standard transaction because it is an individual cost, but it should be simple and they should be set up to withhold taxes on RMDs and for those subject to backup withholding.
Can you explain backup withholding?

I already do withholding from RMDs and want to do it for taxable dividends as well.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

Gill
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Re: Dividend Tax Withholding at Vanguard?

Post by Gill » Sat Jun 23, 2018 8:10 pm

Why not just withhold more from the RMD’s?
Gill

Dandy
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Re: Dividend Tax Withholding at Vanguard?

Post by Dandy » Sat Jun 23, 2018 9:44 pm

I had distributions withheld in taxable accounts at Vanguard on the old platform. When they switched to the brokerage platform that stopped (without notification to me). When I found out I asked my rep and she said it wasn't possible on the brokerage platform. RMDs on the brokerage platform can have Federal and State withholding when I had my first RMD earlier this year.

I would like withholding on taxable distributions instead of paying estimated taxes.

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bertilak
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Re: Dividend Tax Withholding at Vanguard?

Post by bertilak » Sat Jun 23, 2018 10:39 pm

Gill wrote:
Sat Jun 23, 2018 8:10 pm
Why not just withhold more from the RMD’s?
Gill
That is a good idea!
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bertilak
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Re: Dividend Tax Withholding at Vanguard?

Post by bertilak » Sun Jun 24, 2018 5:24 am

I found this website: Estimated Tax Payments - Electronic Federal Tax Payment System (EFTPS).

It allows you to set up automatic estimated tax payments.

Vanguard allows automatic transfers to a bank account so I think the combination of the two (VG push to checking and IRS pull from checking) can accomplish the job even if VG doesn't offer a specific tax-withholding service.

In summary:
  1. In VG, Elect dividends to go to settlement fund.
  2. Set up VG to periodically push cash from settlement fund to checking account.
  3. Use the above-lined web age to automatically grab quarterly tax payments from checking account.
Disadvantage: A bit complicated for spouse (or others) to understand and maintain if needed.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

dharrythomas
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Re: Dividend Tax Withholding at Vanguard?

Post by dharrythomas » Sun Jul 01, 2018 6:50 pm

bertilak wrote:
Sat Jun 23, 2018 7:52 pm
dharrythomas wrote:
Sat Jun 23, 2018 7:39 pm
You can do it, but they make it hard if you said you weren't subject to backup withholding when you opened your account (unless things have changed). I asked about it years ago and they said something about a signature with a medallion guarantee for all owners of the account.

I suspect it is harder than a standard transaction because it is an individual cost, but it should be simple and they should be set up to withhold taxes on RMDs and for those subject to backup withholding.
Can you explain backup withholding?

I already do withholding from RMDs and want to do it for taxable dividends as well.
If in the past, you didn't report some dividend income on your taxes, you are subject to backup withholding and the fund company must withhold 20% of any dividend or capital gains payments. One of the blocks you checked when you opened an account was that you are NOT subject to backup withholding.

Please post what you find out. I'd like to do the same thing if it is not too hard.

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bertilak
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Re: Dividend Tax Withholding at Vanguard?

Post by bertilak » Sun Jul 01, 2018 7:18 pm

dharrythomas wrote:
Sun Jul 01, 2018 6:50 pm
Please post what you find out. I'd like to do the same thing if it is not too hard.
If you are asking about automatic tax withholding of dividends I have figured out this much so far. I plan on calling VG Monday to see if there is a more direct possibility.
  1. The taxable accounts are configured to send dividends to the settlement fund.
  2. The settlement fund is configured to send money periodically to a checking account.
  3. The IRS web page "Estimated Tax Payments - Electronic Federal Tax Payment System:
    https://www.eftps.gov/eftps/direct/EftpsHome.page
    is used to pull estimated tax payments from the checking account. You can set up 4 payments at 4 dates. I sent just one to see how it goes.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

dbr
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Re: Dividend Tax Withholding at Vanguard?

Post by dbr » Mon Jul 02, 2018 8:58 am

Depending on the size of your RMD, you might consider taking it in December and setting withholding at whatever you estimate is needed to cover your tax payment for the year. Such withholding is considered to apply across the year. I never have withholding taken from anything automatically. In some rare cases I have made a payment to account at IRS to keep on the right side of estimated taxes, but not automatically. I find it generally simpler to arrange these things as they occur than to try to figure out and maintain automatic payments.

megabad
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Re: Dividend Tax Withholding at Vanguard?

Post by megabad » Mon Jul 02, 2018 10:15 am

dbr wrote:
Mon Jul 02, 2018 8:58 am
Depending on the size of your RMD, you might consider taking it in December and setting withholding at whatever you estimate is needed to cover your tax payment for the year. Such withholding is considered to apply across the year. I never have withholding taken from anything automatically. In some rare cases I have made a payment to account at IRS to keep on the right side of estimated taxes, but not automatically. I find it generally simpler to arrange these things as they occur than to try to figure out and maintain automatic payments.
Mostly agree that waiting is a good suggestion. Only caveat is that IRS will check your "quarterly" tax payments so you may be required to file form 2210 if you are short in any "quarter". I suggest anyone that has imbalanced income have a 2210 excel sheet setup to quickly check every year.

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