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dwojcik55
New Member

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

 
6 Replies
VolvoGirl
Level 15

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

If you end up owing a lot on your tax return there is a penalty for not paying in evenly during the year and interest.  It is a pay as you go system.  

dwojcik55
New Member

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

This is what I thought... was thinking of not paying any taxes, leveraging that liquid cash to invest and then just paying the taxes come tax time.... hopefully having made money with withheld taxes. Do you know what the threshold is for which you will end up owing interest? is it a percentage or a dollar amount?

Opus 17
Level 15

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

The underpayment penalty is about 2% of what you owe, but it is calculated quarterly. (The penalty you owe for tax you should have paid in April will be more than the penalty you owe for tax you should have paid in September.). Then, you owe interest on all monies owed to the IRS for any reason (including underpaid taxes and penalties) at a variable rate which is currently about 5% APR.  

 

To avoid a penalty, you must owe less than $1000 when you file your return, or the amount you paid in via withholding and estimated payments, must be at least 90% of your tax liability or 100% of your prior year tax liability. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Critter-3
Level 15

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

If you are an employee then you can only stop the federal or state taxes ... there is no way to stop the FICA taxes.   

 

Now to do that you will have to fill in a new W-4 and there are no more "claiming dependents" like in the old days  and you CANNOT claim exempt because you did have a tax liability on the 2020 return and will have one on the 2021 return.   

 

Here is the new W-4 form with instructions ...   https://www.irs.gov/pub/irs-pdf/fw4.pdf

 

If you don't pay the estimates and your withholding isn't any of the following you will be hit with underpayment penalties.

 

1) 2020 balance due after withholding is less than $1000

2) withholding covers 90% of 2020 tax

3) withholding is 100% (110% if 2019 adjusted gross income is over $150,000) of 2019 tax

 

 

 

 

Mike9241
Level 15

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

claiming more exemptions than legit in step 3 of the w-4 and/or materially more deductions in step 4 than you'll actually claim could be construed by the IRS as tax fraud

Critter-3
Level 15

Is it possible to withhold all your taxes and just pay in bulk at end of year? If so, is it as simple as claiming a bunch of dependants?

What you put on the W-4 has never had to match what is on the 1040 you file ... so what you enter on the W-4 is totally your choice but just know the consequences could be painful ...   especially since you are thinking about "gambling"  with the  tax money due to the IRS ... that is as risky  as gambling with rent or grocery money.  

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