Once you are witholding money for taxes on your own (in an account earning interest), do you just pay your bill at the same time as everyone else is getting a refund?
2007-04-04 00:54:07 · 5 answers · asked by drf2684 1 in Business & Finance ➔ Taxes ➔ United States
If you don't want to have any Federal taxes withheld from your paycheck, you would have to put "EXEMPT" on your W4 so that none were withheld. HOWEVER, YOU CANNOT DO THAT unless you have zero tax liability at the end of the year. In other words, that is only reserved for those people that know that they will be getting a refund and will not be owing any taxes at all. If you claim an Exempt status and you are not entitled to it, you can get in a lot of trouble for fraud, so I would not do that if I were you!
So, the answer is NO! You cannot purposely not pay taxes all year and then pay them in one lump sum when you file your taxes. That is illegal. Your taxes are due every month when you get paid (unless you are self employed and filing quarterly) not when you file your return the following year.
2007-04-04 01:37:05 · answer #1 · answered by MarineMom 6 · 1⤊ 0⤋
You can have your company withhold less tax or no tax by filing a new form W4 which allows you to specify your withholdings. However, this does not mean that you can avoid paying taxes until the last minute. Your taxes are due quarterly, and if you are saving money to pay them yourself, you should file a quarterly return and pay the tax due each quarter. Otherwise, you may incur penalties for failure to file in time.
There is a strategy you can use that takes advantage of the fact that the tax law assumes you paid taxes when due if they are withheld by your employer. It depends on your income and how well you manage your money and records. Let's say your tax amounts to approximately three month's pay. You have your company withhold zero taxes from January through September. In September you file a new form W4 with your employer asking to withhold your entire paycheck for the rest of the year. The tax law assumes that your withholdings were paid evenly over the year. During those three months you live off your savings on which you have been earning interest.
You have to be careful to file the W4 in time to ensure enough is withheld near the end of the year to cover most of your tax, so that you avoid any penalties.
2007-04-04 01:40:40 · answer #2 · answered by Anonymous · 1⤊ 0⤋
If you are in the US and you are earning interest on investments, in addition to wages, you have to pay estimated taxes four times a year.
Your employer has to withhold taxes.
If you owe estimated taxes, and don't pay quarterly, you could owe penalties as well as taxes at the end of the year.
2007-04-04 01:32:33 · answer #3 · answered by regerugged 7 · 0⤊ 0⤋
No, you are required to either have taxes withheld, or make quarterly estimated payments. If you just pay at the end, depending on how much you owe you will likely owe penalties for under-withholding.
2007-04-04 08:05:18 · answer #4 · answered by Judy 7 · 0⤊ 0⤋
Yes, pretty much. If you have the means to do so then I'd recommend it. Why should the government get the interest?!?
2007-04-04 00:57:36 · answer #5 · answered by Anonymous · 0⤊ 5⤋