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Withholding taxes on out-of-state bonds
Q
A New York accountant recently advised that New York State was going to, or was, withholding New York State taxes on state municipal bonds held by non-New York residents. I hold New York State bonds and I’m a resident of North Carolina. Can you advise the basis of the accountant’s position? I have been unable to confirm or dispute.
A
James A. Klotz responds:
We welcome your participation in our Bond Forum. Your question is a curious one and leads us to believe there is some misunderstanding between you and the New York accountant.
We can’t conceive of a reason why the state of New York would tax New York municipals for any reason, since, by definition, they are free from New York state taxes.
It is possible he meant that interest from New York bonds is subject to North Carolina state income tax for a North Carolina resident, which is true.
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