Is saving account interest and treasury bill interest withheld by them for tax payment like companies do with salary?

[TaxTheFish]

Is saving account interest and treasury bill interest withheld by bank and treasury to send to IRS for tax payment like companies do with salary?

[Vanessa A]

Yes, if your bank withheld taxes on your interest, this would be similar to your employer withholding taxes on your salary, however it would not be subject to FICA taxes, only ordinary income tax. 

On your 1099-INT, it should show how much they withheld and sent to the IRS.  As you walk through the entries of your 1099-INT, you will need to check the box that says my form has numbers in additional boxes to be able to enter the taxes withheld. 

[VolvoGirl]

Please explain.  How did the bank withhold the interest?  You have to report the interest.  

[Carl · Accepted solution]

It is not common for banks to withhold taxes on your interest earnings. It's also not common for taxes to be withheld on U.S. Treasury Bonds. But if taxes are withheld, they will be shown in box 4 of the 1099-INT.  If your state taxes personal income and taxes were withheld for your state, the withheld amount for the state would be in box 17 of the 1099-INT.

[DianeW777]

it depends.  If the bank does not have your social security number (SSN) they are required to withhold federal tax and submit it to the IRS like an employer does with your wages. If that is the case then they would report that amount to your on your Form 1099-INT in box 4.  When you enter the interest in your tax return, then you would also enter the federal tax withholding. 

When you enter your form be sure to select the check box beside 'My form has info in other boxes (this is uncommon).'

• Where do I enter my 1099-INT?

If you are referring to a delinquent debt, where the IRS keeps some of your refund to pay it, the bank would not hold any of your funds for that purpose.

• IRS will withhold refunds to pay the following delinquent debts:
  • student loans, VA loans, federally sponsored loans, federal or state tax debt, alimony or child support and certain other debts.
  • IRS Topic 203 - Reduced Refunds

@TaxTheFish