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Vanguard Dividend withholding
Old 02-16-2015, 04:03 PM   #1
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Vanguard Dividend withholding

Will Vanguard withhold federal taxes on taxable account dividends? If so, I'm not seeing where to elect it online. Just did my taxes, and had a really good year, which I didn't really factor in when paying our quarterly taxes this year. Ouch! I'd love it if they'd just withhold and send it do Uncle Sam quarterly, or am I living in a fantasy world or missing something. To clarify, we're both still w*rking, and aren't taking distributions, I'm just talking about dividends on a regular old vanilla taxable account.

TIA.
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Old 02-16-2015, 04:26 PM   #2
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I've never seen an option for VG to make withholding on dividends and cap gain distributions. I've always made extra payments through W2 when working, and now quarterly tax payments in retirement.
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Old 02-16-2015, 04:28 PM   #3
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VG does not withhold Federal/State taxes on taxable accounts. It's always been a pain to deal with - especially in retirement with Illinois estimated taxes and penalties for good years looming over our heads.

They withhold Federal on IRA accounts (even Roths-go figure). I believe states are an option they put up with if a state mandates VG withhold, but Illinois doesn't tax IRAs so not an issue I've investigated with VG. We set up our Roths to have dividends pay to our bank for income along with our taxable accounts dividends in retirement.
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Old 02-16-2015, 04:44 PM   #4
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Thanks everyone, I was afraid this would be the answer, but wanted to confirm before I called to ask them to do something they don't do.
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Old 02-16-2015, 08:08 PM   #5
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Thanks everyone, I was afraid this would be the answer, but wanted to confirm before I called to ask them to do something they don't do.
I had contacted them about this when we retired and the ability to cover taxes through payroll went away. It'd be nice if they'd do Fed/State withholding on taxable accounts - would pretty much eliminate tax issues on our taxable accounts for me as well...
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Old 02-16-2015, 08:25 PM   #6
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Thanks everyone, I was afraid this would be the answer, but wanted to confirm before I called to ask them to do something they don't do.
I would just call and ask.... there might be something that we do not see which will allow it...

You know they must have the ability since some people have backup withholding requirements...
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Old 02-17-2015, 10:27 AM   #7
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Thanks everyone, I was afraid this would be the answer, but wanted to confirm before I called to ask them to do something they don't do.
This can be done but requires a phone call to VG. I have selected a couple of my larger taxable funds and have set the cap gains and dividends for fed taxes deducted. If memory serves me correctly, 28% Fed is only option, no state and no smaller than 28%. You have to select the "not reinvest" on the web and then call them to have taxes withheld.

I have a very small pension where I can get some state withholding so this works for me.

I just set this up so don't really have proof but they said it is set up on VG's end.
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Old 02-17-2015, 02:05 PM   #8
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My experience matches dkarst except I could not do it online (started in 2005/2006). The taxable accounts dividends (and my capital gains) were switched at that time to not reinvest. Then I was told to send a letter specifying which funds' distributions to have Federal 28% tax withheld. There was no ability to withhold less and no ability to withhold any Illinois taxes. Has worked fine for me for 8+ years.
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Old 02-18-2015, 08:07 AM   #9
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Interesting to see that Vanguard does have a non-website procedure for Fed tax withholding on taxable accounts (although an all or nothing type of scenario and doesn't include state). I had called them about tax withholding (wanted Fed and Illinois) on our taxable accounts when we retired 5+ years ago, as it is not an option on their website. Was told it could not be done (Fed or State) by our Flagship representative, but might have been confusing as we were only taking dividends and were reinvesting CGs at that time. I work around Federal, but state is my real issue.

I tried a quick search on VG's website about this with no luck. It would appear that others have received "yes we can" or "no we can't" confusing answers from VG regarding withholding taxes on taxable accounts (link to a 2012 short Bogleheads thread on this subject) [http://www.bogleheads.org/forum/viewtopic.php?f=1&t=92230]
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Old 02-18-2015, 09:38 AM   #10
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...I'd love it if they'd just withhold and send it do Uncle Sam quarterly, or am I living in a fantasy world or missing something...
That's quite a fantasy world you got goin' on.
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Old 02-18-2015, 12:43 PM   #11
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I actually got the "yes we can" response first. Set up withhold on 3 of 5 funds. A couple of years later, I sent a letter showing the 3 funds with the Fed withholding and requested they withhold on a 4th fund. I received a call stating "we can't do that". I said, "Sure you can. Look at the 1099-Divs for the listed 3 funds and look at the withholding column." After checking, the response was "Oh, looks like we can. I will pass on your request to my supervisor." You do need to be tenacious.
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Old 02-18-2015, 12:47 PM   #12
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Sorry to go off topic, but every time I click on a link in this newsgroup today I get the following popup message. I did not get this message before today. Typing in my password and hitting OK just reloads the message with the password blanked out. If I cancel, I am fine until I click on the next thread or next page. Any ideas on how to get rid of it?
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Old 02-18-2015, 01:04 PM   #13
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Sorry to go off topic, but every time I click on a link in this newsgroup today I get the following popup message. I did not get this message before today. Typing in my password and hitting OK just reloads the message with the password blanked out. If I cancel, I am fine until I click on the next thread or next page. Any ideas on how to get rid of it?
It is, unfortunately, a bug. The site's support folks know about this and are working on it. Thanks!
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