Lockheed Martin Withholds 20% From Savings Account Withdrawl

A family member works for Lockheed Martin. They offer their employees a savings account to deposit a certain amount of after-tax money in each payday. He uses this to save money throughout the year to be used for Christmas and has done this for some years. Last week he withdrew $1000 dollars and had $200 withheld for taxes. He was informed that this is a new policy to withhold 20% of savings withdrawals for taxes. Since the money was already taxed when he put it in the account he was rather disappointed that this new law requires the company to withhold more taxes. I was unable to get any additional information with a Google search. Can anyone out there shed some more light on this new law? Anybody else out there have this happen?

Maybe the government will need the extra money to help fight NK and maybe China and Russia and Iran.

reply to post by RedPill


Since this is after tax income the withholding should be returned in his tax refund in April. Assuming there isn't some large pretax interest he has to pay off. He isn't getting large amounts of interest in some kind of company stock or bond account is he?

It could be for short or long term taxable gains withholding depending on where the money is being invested.

What you need to do is get the name of the type of account it is. 401k, 403b, etc, etc. Is it a retirement account BTW?

This sounds like more of a "bank policy" than a law.
Anyway, I would ask to see it in writing. Were customers alerted to this fact through mail? Was it somewhere in the fine print? Can a contract be legal if you had no knowledge of it? Can a contract be legal if you did not negotiate the terms or sign? Perhaps this is one of those tricky "adhesion" contracts? When was the new policy announced? Were customers given an opportunity to "opt out" or withdraw before these new "terms" were enacted? By going along with this new policy rather than protest it, does this mean your tacit consent makes it valid now?

reply to post by RedPill


Was the tax a private tax levied by Lockheed Martin for the executives Christmas party?
cheers

reply to post by ntech


No, not a retirement account, just a normal savings account with only after-tax money being put in to it and many untaxed withdrawals in the past.

reply to post by RedPill


Something fishy there. I would ask whoever runs this savings account for the reason why the money was withheld.
Perhaps there is some missing information that triggered the withholding. Some questions I would ask is what is the interest rate? What are they putting the money into? Is it a stock or bond fund? If you are getting 28% back on your investment then it's not a normal savings account. Is it also possible that there is a minimum amount of time the money must stay in the account before you can withdraw some or all of it? Time to ask the company questions on this account. Maybe it converted into some special federal account that has rules to follow and you missed the notice.

Also if the account is getting deposits by a deduction on your paycheck see if your paycheck is taking taxes on those deposits. Perhaps the deposits are pretax money?

Then check with Google and the IRS to make sure it's on the up and up.

Also this Jan. you should get a form for the income tax showing the withheld $200 so you can add that to your tax refund.

u said it was a savings account.
Most savings accounts accrue interest
so they may have a new policy or law
somewhere that says that money
in a savings account is like an investment
in which it accrues a gain. This gain may be
taxable when taken out of the account
regardless of how much the gain is.
It could just be a flat tax.
Not for sure, but this is a prime example
of why u shouldn't trust a bank with ur
money. If this is something new that's
gonna effect everyone, there is gonna be
a lot of pissed off folks when they try to make
a withdrawal from their savings.

Originally posted by ntech
Also this Jan. you should get a form for the income tax showing the withheld $200 so you can add that to your tax refund.

but u see this isn't morally right either.
That money is legally his. The bank
keeps it (labeled as a tax) and they
turn around and loan it out to
someone else and makes a profit
off his refund. This is another way for
the banks to make money off the
populace.