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brite_eyed_pixie · Aug 28, 2007, 02:05 PM

I know that you can fill out your withholdings on your w-4 so that rather than have tax withheld rom each paycheck, nothing is withheld so you consequently end up paying taxes come April. How do I fill out my w-4 to do this?

ebaines · Aug 28, 2007, 02:35 PM

Under most circumstances you shouldn't try to rig your W4 to avoid withholding. You'll most likely set yourself up for a not-too-pleasant interaction with the IRS.

There are two ways one can avoid withholding:

1. Claim exemption from withholding. You can do this if (a) last year you had all the money that had been withheld from your paycheck refunded to you because you had no tax liability, and (b) you expect that this year you will have no tax liability. Do both of these conditions apply to you?

2. The other method is to claim so many dependents on your W4 that your tax liability is essentially 0. But remember that when you file your taxes in April you will need to provide the SS Number of all these dependents, so don't try to fool Uncle Sam by claiming 20 dependents on your W4 now and none on your 1040 next April. An employee who submits a false W4 is subject to a $500 penalty.

Even if this worked - you really can't wait until April to pay your taxes - if you owe more than $1000 in April you should paid quarterly estimated taxes during the year. Otherwise you'll owe interest and a possible penalty for underpayment.

Bottom line - fill out your W4 truthfully.

froggy7 · Aug 28, 2007, 07:35 PM

It's not technically illegal to claim more dependents than you actually have in order to lower the amount of withholding, any more than it is to have extra money withheld from your paycheck. However, you will get hit with a fine if you have not had enough tax withheld (I believe it's if you have to pay over 10% of your tax bill at April). As I found out the hard way, when I was having the maximum withheld but it wasn't enough to be over the penalty threshold. I know, it's not really fair... after all, it's MY money until tax day. But the government wants the interest on it. And, to be fair, if you don't have it withheld, you are going to have to have it on hand come tax day, which can be difficult for some people.

The IRS has a handy calculator to help you determine how much to have withheld. 2007 Withholding Calculator