UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next
Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308225  
Subject: Re: How to use the IRS as a credit card Date: 4/27/2012 12:35 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
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.

#29
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next

Announcements

TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Berkshire Hathaway

The American Energy Revolution
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement