I'm new to all this but have hit this site for many months looking at rates. I finally gave up waiting and thinking rates would go up higher but looks like the Feds gave up. Last week I finally put my money into Unitus 3 year @ 3.5. I split the money up into 2 CDs just in case I need to break one. When I set it up I "assumed" the dividends would be put into the regular saving account they make you setup. I figured I would take the monthly dividends and ACH it back to my CIT account making 2.4%. When I talked to the guy at the bank though he told me the Dividends stay into the CD until it matures thus making the 3.5%, BUT IF I wanted they would put it into the savings. Is this the normal and preferred way?
Now here is the big question. Taxes. This money I used for the CD is from an inheritance. Im keeping it all separated from any joint account with the wife. From my understanding every year no matter the term of the CD I will receive a 1099-int form from the banks no matter if its a savings or CD account. For some reason when I talk or ask my Tax lady I cant seem to get a simple answer on how to keep this separate. Do I 1) some how have them pull money for taxes out of the CD account/? maybe take a % each month from the dividends? 2) or wait till the end of the year. Get the 1099-int and from that I can have them tell me what the exact tax is on that CD account and pay for that separately?
Thanks for any help you can offer ...