Yes – and there are penalties for both overwithholding and underwithholding. I don’t remember what the threshholds are off the top of my head.
If you are self-employed, you are supposed to make quarterly payments (as your own “withholding”, which includes social security and medicare taxes).
If you owe more than $500 you are assessed penalties (according to the tax software I used to do my taxes on Sunday.
I don’t know about overwithholding.
Penalty for overwithholding? Cite? In my experience, the IRS cares not a whit if you have your entire paycheck withheld, and have it all returned after filing. I have had refunds as large as 10% of my income, and 100% of all taxes paid.
I thought I remembered seeing something about this on tax forms years ago, but I may have misinterpreted. I’ve never had any penalty for wrong amounts of withholding, so I’ve never really cared too much about it.
This year unfortunately it’s going to pay for dental work.
That’s my plan this year (my first year with a mortgage!). However, the refund should be less than $200 if I engineered my witholdings correctly…
Well, the $6649 I’m getting from the IRS will go to pay down most of my credit card bills. The $355 from the state gets blown on fun stuff. I already spent $100 of it at Best Buy yesterday.
Whoa how come you americans get so much back? I got $1200 back last yr but that was only cause I spent $4000 on dental work.
I married my soon-to-be ex last December and she had twins in January and I didn’t change my deductions. That’s why I got it all back.
Well, a big part of it is that if you have a mortgage, you get to deduct all the interest you paid. I’m not sure if they do that in every country, but I’m open to be told I’m wrong.
For instance, last year, I might have paid 500/month in principal and 500/month in interest on my house. That’s $6000 spent on interest last year. I get to deduct that from my earnings.
Also, you can kind of determine how much they take out of your paycheck. I think people tend to err on the side of, “I don’t want to OWE the IRS money” even though it all works out the same.
FWIW, it depends how much I get back but I’ve had a HDTV on my mind since the start of the football season. If I get a nice bit back, it might be time to buy, but otherwise, it just goes into savings, which will eventually make it into the market.
Since I only worked for about a month in 2004 at slightly more than state minimum wage, I’m not exactly expecting much. It’ll go to starting me off on an IRA though.