Wells Fargo Temporarily Fixed Tax-Withholding Glitch

Wells Fargo, headquartered in San Fransisco, California and fourth largest U.S. bank by assets, has rolled out a temporary fix to resolve a tax-withholding glitch that had caused financial advisers up in arms in January this year.

The approximately 11,000 Wachovia Securities advisers in Wachovia’s traditional brokerage channel were moved into Wells Fargo’s payroll system in January this year. The system automatically withholds at least 25 percent of commissions for taxes, regardless of their bracket, making a problem for people who fall into higher or lower income tax rate brackets.

Starting this month, Wells Fargo implemented necessary changes to allow advisers to opt in to a new tax-withholding system which allows them to set an appropriate level. They will continue to be paid in two monthly installments. A least 45% of the broker’s average monthly payout from the past three months will be included in the first payment and the second will include the rest of that month’s payout. Wells Fargo Advisors representative said that the new permanent system will be implemented next year.

A lot of brokers with $500,000 or less in annual production faced lower take-home payment due to the flat-rate withholding. Wells Fargo offered a one year loan with 3% interest to provide cash flow assistance to affected advisers, but the solution offered by the financial firm left many advisers unsatisfied. Brokers who produced at least $1 million in production have been withholding too little, which can cause problems with the government come tax return time.

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