zubi
Contributor
When I look at my accounts, savings and CD, I notice it will say interest paid. That amt will be in ( ). Right below thT, there is usually a transaction named taxes withheld. It is often abt 40 to 50% of the interest that was earned.
What exactly is the taxes withheld. And why is that automatically being deducted?
Are there any tax strategies to avoid this tax hit which is essentially making the interest gain negligible?

11 REPLIES

zubi,

Thanks for your inquiry. USAA provides a 1099-INT to an account holder has a combined interest earned of $10 or more or backup withholding in the previous year. Please see you tax advisor regarding specific tax strategies.

Cynthia from USAA doesn't answer the question.  I have the same question and wasn't able to get it answered by customer service.  I'm aware of the 1099 form for interest baring accounts but the question is  - why is there a deduction being made in the name of taxes?  where does this money go?  

Hi kaycee1 - I've sent a secured email to your online message center in reply. To access it, simply click your name, select Alerts & Actions and scroll down to Notifications. - Cathleen

I am having the same issue, were you able to every get an answer as to why they were withholding taxes from the account?

taylor kay, taxes can be withheld from an account for a variety of reasons, such as:

  • B-Notice from the IRS (mismatch between name and Social Security Number).
  • C-Notice from the IRS (underreported income).
  • Signature Card/W-9 not received before interest posted or first statement was generated.
  • Expired W-8 form (foreign tax status for non-U.S. citizens).
  • A member's self-disclosure of need for backup withholding while completing the account application.

Please allow me some time to research the withholding reason for your account. I'll reach out to you shortly. ~Darcy

Same here. I have filled out the new W-9 twice since July 2018 and still taxes are being withheld monthly versus me the tax payer reporting it at the end of the year via the 1099-INT provided by USAA.

 USAA gave me the rude answer of "contact the IRS" if I had further questions without ever explaining why they are now deducting taxes every month nor why they automatially begin deducting them before giving us the member a chance to sign and send the W9 back to them.

 This is pure BS on USAA's part. Publish a layman's explanation as to why this is happening and educate your customer service represenatives so they can answer the question intelligently. 

 We are all aware we must report our 1099-INT when filing our taxes at the end of the year, but what changed that requires USAA to now deduct it monthly and where is the money going monthly since it is not due to the IRS until 15 April every year?

I can certainly understand the frustration and confusion this has created for you, @KennaWayne. I've sent a request to a Subject Matter Expert to check into this and follow up with you. Please allow sufficient time for the research that's needed to be completed. - Cathleen

I've had the same issue for the past 6 months. Each time I called I was PROMISED the situation would be handled by 1. Reversing the withholding; 2. Having someone call me back with better explanations; 3. Resubmit a signature card indicating I have no tax notices or withholdings and it will stop. I sent the card in TWICE and called at least 6 times receiving same promises. No one ever called me back for the past 4 months after promising they would, no reversals on the withholdings and the taxes continued to be taken out. I finally just closed the account.i told the rep it was due to poor unsatisfactory customer service and all she said was "okay, you're account is now closed. Thank you for choosing ..." Yadayadayada. Extremely disheartened by this experience and lack of concern or quality of service from the historic usaa.

Dvyn1,
We regret to hear of the service you encountered. This is not the type of experience we expect for our members. We have taken this opportunity to share your comments with our Member Feedback Teams. We certainly hope this experience will not be a deciding factor in your continued relationship with USAA.

If we can be of any further assistance regarding this matter, please contact us at 1-800-531-8722. Thank you for taking the time to post.