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Hello tax board. I need some input. First of all...I over-withold by not claiming my exemptions. I know it is really foolish, but:

By overwitholding, I have ended up with a pile of 'savings' at tax time. This has allowed me to open and max a Roth IRA for both dw and myself the past 2 years. (the silver lining)

For 2005, I expect to pay zero federal taxes. I will get back every penny that has been witheld and possibly more. To date, my fed WH is 8K which would max both RIRA's for 2005. I am now considering changing my double-you-whatever to claim my actual exemptions so that very little would be witheld for the remainder of the year. I would, in fact, automatically deposit the approximate 'savings' into an account to earn some interest on it. Perhaps an ING. Perhaps a 2005 Roth. I'm not sure.

I AM sure that I have become financially responsible enough to handle such an endeavor without pissing away the difference in my paychecks. I would hope to then be able to withold appropriately for ALL of 2006 and save/invest that additional net all year...assuming I prove the discipline for the rest of '05. Obviously, I have not worked out any details. I need help thinking through this and I figure you guys are just the ticket!

Thanks for any input.
Polywilliams
who knows full-well how stupid it is to give uncle sam an interest-free loan, but does not practice what he preaches...yet!
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It sounds like you know what you're doing.
The form you fill out to change your withholding is a W-4.
Did you have any other specific questions?

Bill
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For 2005, I expect to pay zero federal taxes. I will get back every penny that has been witheld and possibly more. To date, my fed WH is 8K which would max both RIRA's for 2005.

Have you triple-checked these numbers, because they just don't make sense to me. If you've had enough gross income to result in $8K of withholding, I'm having trouble envisioning a 1040 with a zero "total tax" amount, even after adjusting for refundable earned income and additional child tax credits.

Phil
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If you've had enough gross income to result in $8K of withholding, I'm having trouble envisioning a 1040 with a zero "total tax" amount,

Think NOL carryforward. It can take a few years to chew through those in a really bad case.

--Peter
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""If you've had enough gross income to result in $8K of withholding, I'm having trouble envisioning a 1040 with a zero "total tax" amount,

(Think NOL carryforward.) ""


LOL. DW is expecting our sixth child. Eight of us on one modest income, plus we have some rentals that I manage to show a small loss or minimal profit on.

We have had a couple of years where uncle sam actually PAYS US money, thanks to the child tax credit. NEGATIVE tax for the year essentially!

We even take just the standard deduction and no funny-business.

Polywilliams (polydependents)

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