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Barney Asks Rossotti to Evaluate Withholding Proposal

DEC. 15, 1997

Barney Asks Rossotti to Evaluate Withholding Proposal

DATED DEC. 15, 1997
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====== SUMMARY ======

Rep. Barney Frank, D-Mass., has forwarded Treasury a copy of a letter he sent to IRS Commissioner Charles O. Rossotti. In his letter, Barney asks Rossotti for his opinion of a constituent's suggestion. The constituent, Kenneth E. Knapp, suggests requiring publicly-owned companies with dividend reinvestment plans to give shareholders the option of having federal taxes on their dividends withheld. Currently, he says, the companies withhold taxes only for shareholders who fail to provide their taxpayer identification number.

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December 15, 1997

The Honorable Charles O. Rossotti

 

Commissioner

 

Internal Revenue Service

 

1111 Constitution Avenue, N.W.

 

Washington, D.C. 20224

Dear Commissioner,

[1] I enclose a copy of a very thoughtful letter I received from a constituent. He makes the point that his proposal would allow taxpayers on a voluntary basis to improve the efficiency of their tax payments. This seems a reasonable idea to me and I would be interested in your evaluation of it.

Barney Frank

 

Congress of the United States

 

Washington, D.C.

ENCLOSURE

* * * * *

December 5, 1997

Rep. Barney Frank

 

U.S. House of Representatives

 

2210 Rayburn Office Bldg.

 

Washington, DC 20515-1274

Dear Representative Frank:

[2] Please introduce a bill, move it through the legislative process and make a law that makes it mandatory for publicly owned companies with dividend reinvestment plans to:

1. provide voluntary withholding of federal income tax to all

 

shareholders, and

2. offer this service as an option to all shareholders.

[3] All companies are presently required by the IRS to withhold income tax for shareholders who do not provide the company with their Tax ID No., so they are presently, and selectively, providing this service. The reason they do not offer voluntary withholding to other shareholders is that they are penalized with administrative costs for each account that is coded for withholding.

[4] Dividend reinvestment plans are an excellent way to accumulate funds for future needs such as education, retirement, etc. But, the plans that do not have voluntary withholding present a hardship for those of us who do not have a comfortable reserve of cash to fall back on at tax time.

[5] This seems to me to be unfair. The reason some shareholders do not provide their Tax ID No. is that they want their shares and their dividends, to accumulate faster, and, possibly, to avoid paying taxes on their dividends. So, the people who are trying to avoid being taxed get withholding whether they want it or not, while those of us who are trying to do the right thing and pay their taxes are not entitled to this service.

[6] Thank you for your support in this matter.

Sincerely.

Kenneth E. Knapp

 

Wareham, Massachusetts
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