Can I instruct my broker to withhold tax?

capital gains and distributions but

?federal income tax withheld? box (box 4) on the 1099s?

paid-as-you-go on dividends, gains and distribs?

In the case of an IRA distribution, one can request that tax be withheld. In your case, if the amount pus you at risk for penalty for underpayment, you might consider quarterly payments to stay current. Joe

That box is on Forms 1099-INT and 1099-DIV and 1099-B etc because if you fail to certify your SSN and the fact that you are not subject to backup withholding, the payer is required to withhold.

I do not recommend getting on the list of those for whom payers must withhold backup withholding.

Form 1099R on the other hand does encourage and allow you to request tax withholding by fillin out Form W-4P.

You can always shop for a broker who will do it, but I don't know whether you'll have any luck. When the IRS was trying to get withholding from interest and dividends the financial services lobby fought it vigorously. I rarely have sympathy for the industry, but in the case of sales, how are they going to know what the gain/loss is? Maybe after basis tracking requirements are fully implemented they'd be willing to take another look at it.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Maybe, but. Would the broker do it real time or wait till year end? You see, if in January I have a nice short term cap gain and the held amount (how much? Fixed at say 20%, or 15% LT and DIV, but higher for ST?) is then negated by a loss on a different stock, the next similar gain should be ignored. I see this as getting pretty convoluted, unless every transaction is at customer's request. Joe

What would be the advantage of doing that rather than paying quarterly estimates?

R's, John

They *must* have a mechanism for doing so, because when the IRS imposes backup withholding they have to do precisely what you're voluntarily asking them to do. Now, I can believe they aren't set up to withhold on realized capital gains from sales. But I'm sure they are set up to withhold on sales proceeds (though that's probably not what you want in that case).

For one thing, withheld taxes can be treated as withheld equally through the year regardless of when actually withheld. So if you realize you're running behind you can retroactively cure an earlier underpayment. Can't do that with estimated tax payments.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Does that apply to withholding on sales and dividends, or only salary?

Seth

All withholding. See Pub 505.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

This seems conceptually no different from an employer withholding taxes on income, even though you may have an offsetting $3000 capital loss, tax credits that reduce the amount owed, etc. Withholding is computed in isolation. That's why the taxpayer (but not the employer/broker) has the ability to tweak the amount - change the number of exemptions declared, request that taxes be withheld (or not) on IRA distributions, etc.

Right after I retired there were a few years when I had significant taxable events in my brokerage account in December and I had them withhold a fixed dollar amount rather than file estimated taxes. I don't know if that convenience is still available (the brokerage firm isn't there any more)