No. of Recommendations: 2
Comments based on excerpts form the article:

>> The IRS calls the interest on estimated tax underpayments a "penalty." But since the current interest rate is only 3%, it's not really a penalty. In fact it's actually a pretty good deal for someone with a short-term cash crisis. I've been there myself a few times, and I've done the borrow-from-the-IRS drill. (Please don't tell my Mother!) <<

There's also a big difference between defaulting on an unsecured credit card and "defaulting" to the IRS if something doesn't go according to plan and you are unable to "catch up" in a few months. Is it worth it?

>> Note: If you are a salaried employee, you must pay in federal income taxes via payroll withholding. You may be able to adjust the withholding downward a bit for the rest of this year by turning in a revised Form W-4 to your employer. However, the strategy of borrowing from the IRS is basically unavailable to you. Sorry. <<

Not entirely true. In fact I think it's better for salaried employees (If their payroll system supports it) because they can grossly underwithhold for a few months, save the amount of underwithholding and use it for income late in the year when you massively crank up the withholding at the end of the year to catch-up. And this would have ZERO percent interest. As long as you have enough withheld over the course of the year, it (in theory) doesn't matter whether it's withheld evenly throughout the year or almost all in the last 2-3 months).

Having said that, to be safe one would have to keep the underwithheld portion (or the reduced estimated taxes) in a safe, liquid savings account earning less than 1%, so it hardly seems worth it in any event. Plus if you lose your income halfway into this strategy, you are facing a lot of IRS nightmares. Just not worth it in any case, IMO.

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