Is it illegal to intentionally fill out a W-4 form falsely when you begin working at a company, assuming you fill out your income taxes correctly at the end of the year? For instance, suppose you put down a 0 for exemptions (or dependencies or whatever they’re called; it’s been too long) so that extra money is taken in order to reduce - nearly eliminate - the chances of having to pay in money at the end of the year instead of receiving money, which is probably everyone’s desire. Naturally, since you file correctly at the end of the year, the government ends up with exactly its share. There isn’t anything illegal about this, is there? I know there’s a spot to write in a value that will be taken in addition to what normally would, but it has to be a static value, right? It would suck if you were making $400 a week and filled in $50 to be taken out, but then only worked one day on one particular week due to extraordinary circumstances and only got a check for less than $30 when you earned $80.
This may have been asked before, but I couldn’t find it on a search so you get to read it again.
You want to make certain that enough tax is withheld that you don’t end up paying penalties at the end of the year.
There are only 3 things that affect this on the form. First, you can claim “allowances.” The form itself doesn’t require you to say how you arrived at that number.
Second, you can ask that an added amount each paycheck be withheld. You can make this any sum you like.
Third, if you had zero tax liability last year, and expect none this year, you can claim to be exempt from withholding, causing nothing to be withheld. Notice that your assertions in support of this are the only statements of fact you can be lying about sufficient to put you in danger of perjury charges pursuant to your declaration on the form that the statements you are making are true and correct.
So, in short:
You can set your allowances for any amount you want. You want them to be as high as you can make them without ending up with too little withheld, unless you like giving the feds interest free loans of your money.
You can have added amounts withheld per paycheck; it’s up to the employer how they handle your request should you be in danger of wiping out the paycheck.
You can claim exemption, but if you do, and you end up having to pay, you’ll have to fill out a new W-4 the next year, ending the exemption. These days, employers are more likely to question you if you claim exemption, to be certain you know what you are doing.
I believe this is true. At one time, (unless this is an urban legend) some folks used to claim huge numbers of dependents, to the point where no tax was withheld. Then they’d figure out what the correct amount should have been, and put the money away in their own bank accounts to get the interest before paying in full at the end of the year.
However, I think the OP was about claiming *fewer * dependents so as to have *more * money withheld, and I don’t think the IRS really cares if they get to keep more of your money. My husband and I both have put down zero dependents for many years, even when both our daughters were children, because our combined incomes put us in a higher tax bracket than what our individual payroll computations would have come up with.
I agree, withholding more money than is necessary is certainly OK in the eyes of the IRS. My reply was to lonesome loser’s “zillion dependents” comment.
Years ago tax protestors used to use the 10 exemptions ploy to avoid paying any tax, through withholding or otherwise, so that is why employers are supposed to report it.
Filing “exempt” can be a problem. For the same reason. However, if you are a student and poor, you could fall into this category. You file exempt when you know for sure you won’t have any tax liability at all (add exemptions and standard deductions/itemized deductions and if income doesn’t exceed this amount you won’t owe any tax). Employers don’t like this because they have to get more paperwork. It’s a pain. And I think they can have a penalty if they don’t take precautions to assure themselves you really are exempt. Whether or not you have a penalty for not paying in enough through withholding or estimated tax payments depends on the amount underpaid and if you fall under one of the several exemptions for the penalty e.g. you paid in enough this year to cover your tax liability for last year.
Basically, IRS has a pay as you go system. They want the tax as you earn or receive the taxable income. If you fall too far afield of this, that’s when penalties come into play. Penalties are only assessed on tax due so if no tax due, no penalties. that’s why you don’t have to worry if you don’t file when you have a refund coming. However you can only get the refund for three years.
Right- perfectly OK to overwithhold. It’s also generally OK to underwithhold a little. But claiming exempt, 99 or 10+ exemptions (and owing) can get you into serious trouble.
The number claimed does not have to reflect 'reality"- in that if you are single with no kids, you should claim “single & 1” but “single & 0” or “single & 2” are just fine.
No, it’s not illegal to overstate deductions if you do not end up with a large tax liability at the end of the year. If you do end up with a big tax bill at the end of the year however, you can be charged interest and fined. It’s not interest as of the end of the year either. The taxes are normalized over the year and interest accrued quarterly.
It’s perfectly okay to overwithhold also, but you don’t earn interest on the refund money, so it’s best to put your money in a bank instead of allowing the IRS to hold it for you.
Does anyone know how far off you have to be before penalties kick in? Or is it ‘at the descretion of the IRS’ ?
I have habitually put 10+ over the years because I have a large mortgage (relative to my salary - this is California) and I pay a ton of deductible interest. Never had a problem with it, and even with this many deductions I get a refund check at tax time.
Not at all. If you have extra money witheld then the government gets the use of the money for all that time. This is what they call a good deal for them.
So no they don’t care
