What is the benefit of treating the tax withheld as paid when it was actually withheld for purposes of figuring the underpayment penalty?

posted

When the payment is made or withheld earlier, less interest accrues on it. The IRS is a pay as you go system. So, if you earn money in January but don't pay taxes on it until December, interest accrues after April 15th because that payment is "late"

So by showing that you paid/had withholdings earlier in the year, you end up with less of a "late fee"

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