W4 withholding question

[devin4426]

Hello, so I’m wondering about changing my W4 at work so that I am exempt from getting taxes from being taken out throughout the year. I work a lot of overtime so a lot of unnecessary tax gets taken out. Are there any consequences/other feedback that I should know about other than the fact that I would be paying in come tax time? I work in New York State(not NYC) so I was wondering about doing the same with my IT-2104 as well.

[JulieS · Accepted solution]

The risk is in being penalized for underpayment of tax. 

You are expected to pay most of your income tax during the tax year, either through withholding or estimated payments. Your compliance with that is voluntary, but you may be penalized for underpayment.

If you owe more than $1000 when you file your federal tax return, you may be subject to an underpayment penalty. In most cases the penalty, is .5% of the underpayment per month until the amount is paid.

Withholding and estimated tax payments are designed to help you pay your taxes throughout the year and avoid underpayment penalties. 

New York State has underpayment penalties as well. The rules are very similar to the rules for federal underpayment penalties.