Message Font: Serif | Sans-Serif
No. of Recommendations: 0
You can do this but there are risks and problems associated with this plan. First off you can't wait until april 15 and pay the whole amount. The IRS requires that you pay as you go which means that if you under withhold you will need to send in payments quarterly which cuts in to the advantage you are trying to gain. If you fail to pay quarterly in sufficient amounts you will be required to file form 2210 Underpayment of income taxes wherein a penalty is levied and is calculated much like interest with the going rate about 9% I think. Further if you indicate 10 or more deductions on your W-4 your employer is required to notify the IRS. The IRS may or may not get in touch with you. But if they do, be prepared to explain why you need 10 deductions. Overall I don't think it's worth it. The most efficient approach is to adjust your withholding so that at the end of the year you will have paid an amount equal to your total tax bill for the previous year. Since your salary probably has gone up over the previous year your total tax bill for the curent year is higher and you will need to write a check on 4/15. Do this every year.

Joe Varga
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.