which is cheaper? Also, where exactly do I claim "ZERO" to make them take as much as they want now and not at tax return time? (new at this - just moved to U.S. -- pls HELP)
2007-05-01 03:41:14 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
You are not "paying taxes" when money is withheld from you pay check. That money simply is being placed on deposit to pay your taxes at the end of the year. You are required by law to place enough on deposit to pay most of the tax that will be due at the end of the year. If you knew exactly how much tax would be due and withheld exactly that amount that would be the best and cheapest way. However that is usually not the case so something within 90% of the tax due is good.
2007-05-01 04:47:47 · answer #1 · answered by ? 6 · 1⤊ 1⤋
Taxes are due when the income is earned, not when the tax return is filed. There can be penalties for underpayment of estimated taxes or underwithholding if the amount is significant. For this reason it's "cheaper" to have the proper amount withheld at the source.
You tell your employer how much to withhold by filing Form W-4. Claiming Single filing status and zero exemptions will result in the most tax being withheld. This may be too much or not enough depending upon your individual circumstances. The worksheets on page 2 will help you to fine tune the withholdings so that the correct amount is withheld.
2007-05-01 11:51:48 · answer #2 · answered by Bostonian In MO 7 · 2⤊ 1⤋
When you start a job as an employee, you'll fill out a form called aW-4 form - that's where you claim zero, or more for them to take out less.
If you don't pay in enough during the year, you can end up owing penalties when you file your return even if you pay all that you owe with the return, so the responder who suggested keeping it in a savings account is giving you bad advice.
2007-05-01 17:18:23 · answer #3 · answered by Judy 7 · 1⤊ 0⤋
Paying taxes later is definitely cheaper, but mostly in the sense that the money you are putting away to pay the taxes later will be earning interest. If you pay them out of your pay check every week you don't get that interest. As for the 'ZERO' , you claim that on the tax form you fill out when you first started your job. You can re-file that tax form if you already turned it in, just ask your boss or HR person.
2007-05-01 10:47:34 · answer #4 · answered by Carl M 2 · 0⤊ 3⤋
You will pay the same amount, the thing is that if you keep all your money till the end of the year you can get interest off of it, invest it, or live off of it during low points in the year. Of course that only works if you have the discipline to keep enough saved to pay your taxes at the end of the year. Just make sure you don't have too much withheld during the year, you are simply giving the government an interest-free loan.
2007-05-01 10:45:25 · answer #5 · answered by krg427 2 · 0⤊ 3⤋