0% Interest Loan from the IRS

[manlymatt83]

Right now I declare "0" dependents, so the IRS takes the most tax out of my paycheck.

I was thinking of switching this to "1", so I would get more money now and get less of a refund at the end of the year.

My refund this year was almost $4000, because I declared 0 among other things.

Good idea? Bad idea?

I'm 23.

-Matt

 

[tfinch2]

The idea is to get your refund/payment as close to zero as possible, not "less" of a refund.

Hell I'd rather get more money throughout the year, save a bit for taxes myself, and have a modest payment. Interest FTW.

 

[manlymatt83]

Originally posted by: tfinch2
The idea is to get your refund/payment as close to zero as possible, not "less" of a refund.

Hell I'd rather get more money throughout the year, save a bit for taxes myself, and have a modest payment. Interest FTW.

SO as a single 23 year old, I could set myself as a dependent?

 

[cKGunslinger]

Originally posted by: tfinch2
The idea is to get your refund/payment as close to zero as possible, not "less" of a refund.

Hell I'd rather get more money throughout the year, save a bit for taxes myself, and have a modest payment. Interest FTW.

QFT. Right now, you are giving the IRS a 0% loan.

 

[FoBoT]

yes, you should adjust your withholding so that is more closely matches your tax owed

the sooner you get your money, the better

 

[intogamer]

 

[SSSnail]

Depends on your spending and savings habit, having a refund is not entirely too bad. If you have a few more hundreds a month, do you think you'd be able to save $4K a year without spending it?

 

[vi edit]

Depends entirely on your saving habits/discipline.

Many people that have that extra money a month just blow it on stupid sh!t they don't need instead of putting it to work for them. When they get it lump sum it's a much more useable amount of money that can be put towards debt repayment, down payments, ect.

For these people it's better to have extra pulled out and then given back to them where they can find better uses.

Of course, they could just turn around and buy a TV with it, but at least they paid cash for it

 

[ThunderDawg]

There are better ways to accumulate money.
I would rather borrow from the gov't. at 0%

 

[manlymatt83]

So would telling my payroll I want to declare "1" instead of "0" be better?

 

[erub]

last summer, as an intern, I put down 11 exemptions.My salary was only high for 12 weeks. Turned out to be just about perfect because I owed $40 at the end of the year.

 

[vi edit]

Originally posted by: mjuszczak
So would telling my payroll I want to declare "1" instead of "0" be better?

It completely depends on your current finanical situation and your personal finanical discipline.

If your taxes don't come out in your favor do you have money left over at the end of the year to pay in? Will you actually put that extra money a month to good use?

 

[AgaBoogaBoo]

Originally posted by: cKGunslinger

Originally posted by: tfinch2
The idea is to get your refund/payment as close to zero as possible, not "less" of a refund.

Hell I'd rather get more money throughout the year, save a bit for taxes myself, and have a modest payment. Interest FTW.

QFT. Right now, you are giving the IRS a 0% loan.

/thread

 

[ThunderDawg]

Originally posted by: mjuszczak
So would telling my payroll I want to declare "1" instead of "0" be better?

In the U.S., everyone is entitled to claim 1 Federal Income Tax Exemption. If you are single and have only one job, you are entitled to claim 2 exemptions. If you have sufficient Schedule A deductions, you may also figure those into the total exemptions you claim. If you want large refunds, you can also reduce your exemptions, it's up to you.

Results may vary. See Dealer for Details.
http://www.irs.ustreas.gov/pub/irs-pdf/fw4.pdf

 

[TuxDave]

The $4000 refund, was it from a summer internship or one full year of working. If you put down the right number of exemptions and you have no itemized deductions you should be getting next to nothing for your tax refund.

 

[Crucial]

If I only had such a luxury. If I want a refund I just have to increase my quarterly payments to the man. Why would I give him more than is necessary? You should be thinking the same way.

 

[csiro]

I think the IRS has something called an underpayment penalty. If you withhold too little for the year, they'll penalize you. They don't do a thing however if you withhold too much.

 

[SoulAssassin]

Changing it to 1 or 2 will get you more back now and shouldn't put you anywhere near any underpayment penalty. Just make sure you're disciplined enough to actually save the extra money.

 

[ebaycj]

Originally posted by: csiro

I think the IRS has something called an underpayment penalty. If you withhold too little for the year, they'll penalize you. They don't do a thing however if you withhold too much.

I believe they only punish you if you do this for multiple (at least 2) consecutive years. So you'd probably be ok with doing it for one year.

DISCLAIMER: I am not a tax attorney, so you should verify any info with someone that is.

 

[compuwiz1]

Their using 4000 of your money for a year, paying you nothing for it. Not a good investment, if you ask me, unless you are just trying to have a "forced savings account" you can't touch, except at tax time.

Wouldn't it make sense to withhold less, then put the difference in 401k or other investment?

Someone I know, goes exempt all year, while investing the appropriate amount, then when he files, he pays whatever tax is due.

 

[SoulAssassin]

Originally posted by: ebaycj

Originally posted by: csiro

I think the IRS has something called an underpayment penalty. If you withhold too little for the year, they'll penalize you. They don't do a thing however if you withhold too much.

I believe they only punish you if you do this for multiple (at least 2) consecutive years. So you'd probably be ok with doing it for one year.

DISCLAIMER: I am not a tax attorney, so you should verify any info with someone that is.

And you have to grossly underpay. Just simply owing taxes isn't enough to get flagged. I know people that have owed at the end of the year for probably 20 years without problem.

 

[manlymatt83]

Originally posted by: ThunderDawg

Originally posted by: mjuszczak
So would telling my payroll I want to declare "1" instead of "0" be better?

In the U.S., everyone is entitled to claim 1 Federal Income Tax Exemption. If you are single and have only one job, you are entitled to claim 2 exemptions. If you have sufficient Schedule A deductions, you may also figure those into the total exemptions you claim. If you want large refunds, you can also reduce your exemptions, it's up to you.

Results may vary. See Dealer for Details.
http://www.irs.ustreas.gov/pub/irs-pdf/fw4.pdf

I have one job, but I do side work

 

[EagleKeeper]

If you owe more that $1K at the end of the year, you can get hit with an under-payment penalty.

If you are Single, you can always claim 1 unless you are working two jobs. (You could get bit by bracket creep).

After looking at your taxes withheld over 2-3 pay periods, bump your withholding exemptions up to two and look at the difference.

As long as you can extrapolate the difference to be less than 1K over the tax year, you are safe.
If the number if more than 1K and you have the discipline to put the $$ aside until Dec, then you can continue to increase the exemptions up to 9 without any problems with the IRS.
In December, you would then need to write Uncle a check for the amount of excessive tax that was not withheld. This avoids any penalties showing up due to underpayment.

 

[elektrolokomotive]

Originally posted by: csiro

I think the IRS has something called an underpayment penalty. If you withhold too little for the year, they'll penalize you. They don't do a thing however if you withhold too much.

I almost got hit with that one this year. I claimed 2 exemptions last year. Got divorced and was supposed to file jointly this year. My ex screwed me over and filed on her own (she had plenty of exemptions since she has 2 kids), leaving me to file singly. I had to do a little research, but I don't get hit with the penalty. Unfortunately, I did have to pay the IRS $2300 this year, when I was expecting 1/2 our joint refund instead.

 

[necine]

For me right now I'd rather have a higher refund. That boost comes right at the time tuition is due for the spring. If I were in your position I'd claim "1" -- myself.