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Tax Withheld

Discussion in 'Off Topic [BG]' started by lwknives, Mar 3, 2014.

  1. lwknives


    May 6, 2012
    This may be a dumb place to ask this but...
    Am I correct in understanding that you dont pay interest on tax so long as you pay it by the due date at the beginning of the year?

    If you dont have your company take any taxes out of your pay check on your W-4 can you look at your taxes like an interest free loan that you have to pay back in a year? I would think you could wire that money to a savings account and earn interest on it. Is there something Im missing?

    Im getting ready to change jobs and want to fill out my W-4 the most financially beneficial way.
  2. blastoff99


    Dec 17, 2011
    SW WA
    Don't do that. If you pay nothing in for the whole year and then hit them with it all at once (while you had income the whole year), you will be subject to interest and penalties.
  3. BurningSkies

    BurningSkies CRAZY BALDHEAD

    Feb 20, 2005
    Seweracuse, NY
    I did have a job without withholding, and yes come April 15th, you have to pony up the full amount owed. And you can do it without penalty.

    But...the real trick is being responsible enough to save so you can provide that 'lump sum' cash payment to the IRS and your state. It seems like a great idea to bank it, and get the interest, but even in a savings account with average interest rates, you're not minting real money and its probably worth what you do 'make' in those few months just to have it withheld properly.
  4. pedroims


    Dec 19, 2007
    I would not do that, assuiming that you want this money so you can spend it then how you are planning to get the money to pay uncle Sam?
  5. Febs

    Febs Supporting Member

    May 7, 2007
    Philadelphia, PA
    Penalty for underpayment of estimated tax: http://www.irs.gov/taxtopics/tc306.html

    "If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax."
  6. elgecko


    Apr 30, 2007
    Anasleim, CA
    I did it for a couple of years. If I remember correctly, there penalties to be paid.
  7. BurningSkies

    BurningSkies CRAZY BALDHEAD

    Feb 20, 2005
    Seweracuse, NY
    Things must have changed in the intervening years between when I last worked at a place that didn't withhold (2000) and now. As someone who didn't really make very much, I can say that I would remember paying a penalty.
  8. lwknives


    May 6, 2012
  9. lwknives


    May 6, 2012
    I would use it to invest conservatively not to spend.