Bank CD tax question.

[TNDemo]

I have a CD maturing at a bank and got a statement detailing the amount of interest earned and the fact that they had withheld a certain amount for taxes. I have never had a bank withhold the tax before. Is this normal?

[NMDemDist2]

1. I think you can choose that option when you set up the CD n/t

[TechBear_Seattle]

2. Yes, it is normal

Income from some investments is treated much as income from a job. Certificates of deposit are one such investment. If the return on the investment was substantial enough, the bank would have been obligated to retain a portion as income tax withholding. You may want to check that the tax was taken only from the return on the investment and not the principal itself.

[Tempest]

3. Some banks will depending on the amount of interest

Check with your bank and find out their policy.

[Warpy]

4. My bank doesn't

and I have to report it on my income tax statement.

I'm guessing this is a rather large CD. You might want to move it to a bank that doesn't withhold interest for taxes. This bank is pretty much stealing it off the top and hanging onto it to generate interest for THEM.

It doesn't seem normal to me.

[TNDemo]

5. It's not a large CD.

It's a few thousand.

[Warpy]

6. If it's under $50K

cash it in and find another bank.

[wishlist]

7. Never heard of this in my 30 yrs of having CD's unless no SS number given

Only when I converted a traditional CD to a Roth did a bank ask if I wanted taxes withheld or not. They have always not withheld any taxes. (As I already have taxes withheld from my pension income, I signed a form opting out.) For many years though banks withheld taxes if they didn't have the owner's Social Security number with which to report the income to IRS.

[trashcanistanista]

8. I have CD"s under 50K at BofA and they don't do this.

I claim the interest on my return every year. Switch banks.