Stock Dividend Withholding?

We now receive ~$150,000 in qualified stock dividends annually. Only my wife works, and we have had all of our state and federal tax withholding (w/h) taken from her payroll check. Soon she too may want to likewise retire, as the needed w/h from each check (for both her salary and the dividends) makes it seem "pointless to work" - lol! I was wondering if I could instruct the agent for the company paying those dividends to withhold a one time w/h payment for both the fed and state (CT) each December. That w/h would be calculated to be sufficient, such that we would not owe a tax penalty. I am also assuming that there is no "time element" associated with that stock dividend w/h payment; like payroll w/h, it is assumed to be paid over the entire tax year. I would prefer not to file quarterly estimated taxes (nor further increase the w/h from wife's check). Thanks for any advice.
-don
Reply to
don
wrote:
You can ask, but AFAIK they don't have to unless you're subject to backup withholding. I'm not even sure whether they are allowed to, but there's an easy way to find out. -- Phil Marti Clarksburg, MD
Reply to
Phil Marti
don, it's a good idea, but might be difficult to get a broker to make a one time withholding each year. I suggest if you have an IRA or 401k or pension that you take a Required Minimum Distribution from that you use that for your withholding. Otherwise, the broker would probably withhold monthly the same amount. ed
Reply to
ed
Thank you for the quick response -- most appreciated.
In my initial post, I did not realize that it was germane -- but we own the dividend paying stock in certificate form (not held in a brokerage acct). The transfer agent for that stock has now said they can W/H both fed and state taxes. I was unsure if the once a year payment, by the transfer agent, would lead to any problems. By making one payment in December I will know our total income from: My wife's yearly salary, the total dividend payments received from all of our stocks, and any stock trading capital gains -- all year to year variables. My wife would continue to have some money w/h from each pay check, but no longer an amount that would be approach our total tax year liability. Thanks again!!
Reply to
don
An amount withheld at the end of the year to cover the entire year will generate a penalty for underwithholding. Nan, EA in LA
Reply to
Nan, EA in LA
wrote:
Just make sure that the December dividend payable will be enough. -- Phil Marti Clarksburg, MD
Reply to
Phil Marti
Why? The default treatment of withholding credits when considering estimated tax penalty is to spread them equally throughout the year. See Publication 505 and the instructions for Form 2210.
-- Phil Marti Clarksburg, MD
Reply to
Phil Marti
I am aware that I need to insure that sufficient $'s are w/h, so we will not owe a penalty (based upon minimum withholding reg's). Given that I will "know" our yearly income from all sources, I can instruct the transfer agent to w/h enough from the December dividend distribution, so as to avoid that penalty. You further lead me to believe that I will not face any penalty for using JUST the December stock dividend payment, as the most significant portion of our total withholding (for both Fed and CT). My wife will have continue to have some w/h from her salary, but that dividend w/h will cover most of our total liability. Again thanks to all of the respondents - this is such a valuable site.
Reply to
don

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