I have substantially higher wage income in 2001, compared to 2000. Under the safe harbor rule, I need to have 100% of my 2000 taxes withheld in 2001, to avoid paying interest on under withholding. (I don't fall under the 108.6% provision for high AGI.) I am planning to have my withholding reduced to equal 2000 taxes by taking additional exemptions. I can postpone paying the difference until April 15, 2002 and earn additional income in the meantime. The W4 worksheets allow you to calculate additional exemptions if your expected itemized deductions will be higher than standard deduction. Can I also take additional exemptions to reduce my withholding to equal 2000 taxes? Is this an appropriate use of exemptions?Do I need to ensure that at leat 90% of 2001 taxes are withheld or am I safe in withholding 100% of 2000 taxes, which will be much lower?Do I need to explain to my employer or IRS why I am taking substantially higher number of exemptions on my W4? I figure I have to take about 10 extra exemptions (at $3,000/ exemption) to reduce withholding to 2000 level.Thank you in advance for your time and willingness to share your expertise.
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