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| *Loan,banking and credit>>>tax exempt |
Why doesn't the IRS let you claim EXEMPT on your W4 so that you can pay taxes at the end? |
Instead of paying per payheck, you could take the money out of your paycheck yourself and then put the money in an interest bearing account. When it comes time to pay, you just pay out of that account on April 15. At least you'd have made interest on the money instead of having the IRS take it out each paycheck. For some reason, the IRS forbids this. Wouldn't it be better to let us invest the money instead of giving the Gov't an interest free loan? I see your point on this. There is (kind of) a solution to your suggestion. What you could do is claim a really high number of exemptions on your W-4 at the beginning of the year, thus increasing your take home pay. Then, take that money, let it earn interest for awhile. The next part is the hard part: at the beginning of the 4th quarter of the tax year (October 1), review your tax liability. This is basically like calculating your tax return 3 months early. See what your projected liability is for the year, then use the last 3 months of the year to catch up on your withholding. As long as you have enough withholding to cover the prior year's tax liability, there won't be a penalty. The IRS won't assess a penalty for underpayment (assuming all you have is earned income) because it's assumed that withholding is paid evenly throughout the year. That said, that method can really blow up in your face unless you're an absolute ace at tax preparation. Also, is it really worth the hassle to go through all of those calculations just to earn a few dollars of interest? My recommendation would be to make sure you're not withholding more than is necessary, but I just thought I'd throw that above information out there for you to chew on. Source(s): cpa I love your idea. But as good citizens we have to follow thw LAW!!! Because the Tax system was set up by Congress to be a pay as you earn system. If the majority of taxpayers did not have the taxes withheld, the money would not be saved but spent on other things, thereby leaving the taxpayer with a balance they owed, plus penalties and interest Interna; Revenue Service 1-800-829-1040 Because the law states that taxes are due and payable when the income is earned, not when you file your tax return. The IRS doesn't care how the system works. They just have to operate within the law. Congress writes the laws, not the IRS. If you have wages, the IRS requires that you pay taxes as you earn the income. However, withholding of wages is considered as paid over the year. So, if you do not withhold enough taxes, you can adjust your withholding in December and make up for the required taxes, and not owe a penalty. So, you can do what you propose, within limits. |
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