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BackInTex · #1 Post by **BackInTex** » Sat Jan 05, 2008 5:30 pm

Depending on what happens with the AMT legislation updates I'll either pay $3000 or get back $300, or somewhere in between.

Last year I over deducted so I upped by W-4 exemption to 24 in October so no more taxes would be withheld. I didn't reduce that number until May or so this year. If the AMT goes away for me, then I almost pegged my withholdings perfectly this year.

Of cours all things being equal, I would prefer a $9,000 refund like I got last year, but I essentially got it each pay day through May.

TheConfessor · #2 Post by **TheConfessor** » Sat Jan 05, 2008 5:39 pm

Technically, if you had essentially steady income each month but didn't start withholding until May, you'll owe a penalty for underwithholding. Taxes are supposed to be paid throughout the year, as income is received. Whether they'll actually nail you for it is a different matter.

BackInTex · #3 Post by **BackInTex** » Sat Jan 05, 2008 5:49 pm

TheConfessor wrote:Technically, if you had essentially steady income each month but didn't start withholding until May, you'll owe a penalty for underwithholding. Taxes are supposed to be paid throughout the year, as income is received. Whether they'll actually nail you for it is a different matter.

The IRS views taxes witheld by an employer as paid evenly througout the year. There are no quarterly requirements for the non-self employed.

And if I witheld Jan-July then stopped and came up short, the penalty would be calculated as if 1/4 of it were short each quarter so I'd pay 3 quarters interest on the 1st 25% of the shortage even though I was current until the 3rd quarter.

Plus, I don't think there is any penalty on AMT underpayments. There might be, but because my withholding this yeare is more than my total taxes for last year, there is no penalty.

TheConfessor · #4 Post by **TheConfessor** » Sat Jan 05, 2008 5:53 pm

Oh, really? You can have nothing withdrawn by your employer all year and then submit a change form in December to have a full year's worth of taxes withdrawn? Seems unlikely, but surprising if true.

BackInTex · #5 Post by **BackInTex** » Sat Jan 05, 2008 6:30 pm

TheConfessor wrote:Oh, really? You can have nothing withdrawn by your employer all year and then submit a change form in December to have a full year's worth of taxes withdrawn? Seems unlikely, but surprising if true.

Yes, true. But risky. What if you get laid off. Ouch! Then you have to pay in estimated tax on form 1040-ES. Then when you do your 1040, you have to report the quarters you paid your estimated payments. Then you will owe penalty and interest.

But not if everything shows on a W-2. There is no period reporting on a W-2. One income number for the year, one 'taxes withheld'. On form 1040, the IRS asks for only one number, 'Tax Withheld from Forms W-2'.

#6 Post by **Bob78164** » Sat Jan 05, 2008 8:10 pm

TheConfessor wrote:Oh, really? You can have nothing withdrawn by your employer all year and then submit a change form in December to have a full year's worth of taxes withdrawn? Seems unlikely, but surprising if true.

That would avoid underwithholding penalties. The problem is that one would likely have to perjure oneself in order to accomplish it. When you fill out the W-2, you are swearing that you believe in good faith that you are entitled to the number of allowances you're claiming. If you claim so many that you end up with nothing withheld, that's a hard position to defend, even if you make it up before the end of the year.

Note that BiT does not appear to have fallen afoul of this rule. His estimate, in October 2006 when he made it, appears to have been made in good faith. Here merely didn't get around to changing it until May. --Bob

SportsFan68 · #7 Post by **SportsFan68** » Sun Jan 06, 2008 10:28 pm

Bob78164 wrote:
TheConfessor wrote:Oh, really? You can have nothing withdrawn by your employer all year and then submit a change form in December to have a full year's worth of taxes withdrawn? Seems unlikely, but surprising if true.
That would avoid underwithholding penalties. The problem is that one would likely have to perjure oneself in order to accomplish it. When you fill out the W-2, you are swearing that you believe in good faith that you are entitled to the number of allowances you're claiming. If you claim so many that you end up with nothing withheld, that's a hard position to defend, even if you make it up before the end of the year.

Note that BiT does not appear to have fallen afoul of this rule. His estimate, in October 2006 when he made it, appears to have been made in good faith. Here merely didn't get around to changing it until May. --Bob

No perjury would be required for anybody. Back in my Human Resources days, we had an employee allow himself to fall into an unusual tax situation. He came in to the HR office in November and increased Line 6 to $1,200 per pay period. It relieved whatever whack situation he'd fallen into.

Then there was the most anal retentive person I've ever met in my entire life, the spouse of one of my former co-workers. He did his taxes every January . . . for the coming year. Then he would have his wife change Line 6 on her W-4 to somewhere between $12 and $20 additional withholding. He was always within $25 when he filed the following year.