karn (02/08/83)
I heard one suggestion this evening as to how you can avoid having your interest earnings withheld. I don't remember the provisions of the law, but I believe that the institution isn't required to withhold until cumulative interest reaches $150 (?) or more. The solution therefore is to simply spread your savings around to enough accounts and/or institutions to make sure your yearly interest in each doesn't exceed $150. I will probably be doing this with my money market account anyway, since I have felt I have too much in one place - most have relatively modest minimum balance requirements once you open them. Let's all hear it for government-inspired efficiency. (Or are they trying to boost business for the Post Office?) Phil
leichter (02/08/83)
The limit at which institutions MUST start witholding is $100 interest for the year. They MAY, however, withold on smaller amounts, and most probably will, since they then get to hold on to your money until the end of the quarter, earning interest on it but not having to pay you anything. One interesting (no pun intended) question is what happens if you have several accounts at the same bank, no one earning more than $100, but together over the limit? The last I heard, the regulations on this - which are up to the IRS to draft - had not yet been issued; the law as written doesn't say. As always, though, expect the banks to be enthusiastic about witholding for (against?) you, whatever the regs turn out to be. -- Jerry decvax!yale-comix!leichter
jhs (02/08/83)
In response to the suggestion that funds be switched before cumulative interest reaches $150: The new law requires withholding at that point, and leaves it optional before then. However, if (as I would expect) the withholding process is computerized, it will probably be less expensive for banks, etc. to withhold from *everyone* rather than distinguish net amounts withheld. This is analogous to the situation with regard to checks: law requires any personal check over a certain amount (~$200, I believe) to be microfilmed. I doubt very many institutions would go to the expense of distinguishing amounts, and most just microfilm *every* check. If you really want to avoid withholding, I would suggest looking into tax-free bonds, either singles issues or via mutual funds. Jerry