The example suggests that one does not have to pay taxes on DRIP earnings, which is not true! http://www.investopedia.com/ask/answers/06/directsharepurchase.asp
Actually, I think "suggests" is putting it mildly! The entry states:Because the investor doesn't receive a dividend check, he or she doesn't have to pay tax on the money....which is not only false, but dangerous in that it could lead someone to underpay his or her taxes for many years and end up owing the IRS an enormous amount in back taxes and hefty penalties.
I believe that the ONLY way that you don't have to pay taxes in the year that the dividend was earned is if it is in a retirement account. Then you must pay tax as you take $$ out of your retirement account unless you have a Roth. Correct me if I am wrong.Bird
Bird,You got it! This is why most of my DRiP accounts send me those pesky 1099's......sheesh. Here all I'm trying to do is increase the National Savings Rate, albiet single handedly.WineFool
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