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Income Tax Withholdings - Should I withhold as much as possible?
Posted on 1/2/18 at 12:29 pm
Posted on 1/2/18 at 12:29 pm
For the longest time, I've always aimed at trying to get my tax return / debt as close to zero as possible. Currently, I don't have any withholdings for myself and family, and that has been working out pretty good. I've never thought about it, but why not take the maximum withholding every year and re-invest it and earn interest off of it? I know I'll have the money to pay back any tax amount I owe come April, so why not just take an interest free loan from government?
Any tax experts aware of any drawbacks of doing this?
Any tax experts aware of any drawbacks of doing this?
This post was edited on 1/2/18 at 12:30 pm
3
Posted on 1/2/18 at 12:38 pm to SUB
Because you get penalized if you underpay too much.
Posted on 1/2/18 at 12:54 pm to Teddy Ruxpin
What's the penalty? I'm having trouble finding it. Or is it complicated to calculate?
Also, do you think there will be additional exceptions this year since taxes are drastically changing? I imagine most people will be more in the + after this year, but I can see it go the opposite way for some.
Also, do you think there will be additional exceptions this year since taxes are drastically changing? I imagine most people will be more in the + after this year, but I can see it go the opposite way for some.
Posted on 1/2/18 at 12:59 pm to SUB
The link I found says .5 percent of the total amount you owe calculated for each month that you haven't paid.
The interest rate on this owed to the IRS was 3% in 2014.
I'll search for more recent stuff.
There's a bunch of exceptions and stuff too
The interest rate on this owed to the IRS was 3% in 2014.
I'll search for more recent stuff.
There's a bunch of exceptions and stuff too
This post was edited on 1/2/18 at 1:02 pm
Posted on 1/2/18 at 2:15 pm to SUB
Look for Form 2210
Posted on 1/2/18 at 10:19 pm to SUB
You have to have paid 90% of your current tax bill or 100% of last years tax bill.
You also can't be more than 1000 off from the smaller of the two numbers calculated above.
In short, pay uncle Sam.
You also can't be more than 1000 off from the smaller of the two numbers calculated above.
In short, pay uncle Sam.
Posted on 1/2/18 at 10:59 pm to SUB
For what little I can actually earn on that amount of money, I'd rather simplify things and have the right amount withheld. I did get penalized for withholding too little one year and it ended up being a decent amount of penalty as well as a royal pain in the arse to complete my filing because you have to do a whole bunch of extra schedules in order to figure it all out.
short of it is, do yourself a favor and have the right amount withheld.
short of it is, do yourself a favor and have the right amount withheld.
Posted on 1/3/18 at 2:14 pm to Spankum
I read up on the exceptions for the penalty, and this is what I found. I realize the year isn't 2016, but I doubt this changed for 2017.
LINK
I had no tax liability in 2016 since I paid more in taxes than owed, so I should be good if I underpaid in 2017. Right?
LINK
quote:
No penalty. Generally, you will not have to pay a penalty for 2016 if any of the following apply.
The total of your withholding and timely estimated tax payments was at least as much as your 2015 tax. (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen.)
The tax balance due on your 2016 return is no more than 10% of your total 2016 tax, and you paid all required estimated tax payments on time.
Your total tax for 2016 minus your withholding is less than $1,000.
You did not have a tax liability for 2015.
You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000.
I had no tax liability in 2016 since I paid more in taxes than owed, so I should be good if I underpaid in 2017. Right?
Posted on 1/3/18 at 2:33 pm to SUB
quote:
I had no tax liability in 2016 since I paid more in taxes than owed, so I should be good if I underpaid in 2017. Right?
I'm not a smart man but if you paid taxes you had a tax liability. The fact you paid more than that liability doesn't mean you didn't have one.
But I could be wrong
Posted on 1/3/18 at 9:37 pm to SUB
Wrong. I think you're interpreting that incorrectly.
Posted on 1/4/18 at 9:39 am to NOLA08179
Damn, you are right. I saw another page that had the definition of "no tax liability." Ugh.
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