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Claiming a few extra to break even at tax time?

Discussion in 'Archived Threads 2001-2004' started by Kevin Coleman, Nov 6, 2001.

  1. Kevin Coleman

    Kevin Coleman Second Unit

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    Okay it looks like from my early estimate of numbers that I will be getting back a decent amount of money this year from the federal government. I have been upping my allowances every year to try and make it equal out becuase I don't like to let the feds borrow my money all year for free. If anything I would like to owe a little bit.
    My question is this:
    Is it Ok to ad a few more allowances to your W4 form to make sure they don't take out too much taxes all year so I don't keep getting these big refunds. Is it illegal to claim more allowances during the year that what you will finally claim on your tax return?
    Thanks guys.
    Kevin C. [​IMG]
     
  2. Steve Tannehill

    Steve Tannehill Ambassador

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    I am not a tax advisor, but it is my understanding that you only get penalized when you don't withhold enough to cover your tax liability.
    Withholding too much only gives the U.S. Treasury an interest-free loan. I'm with you...I don't like refunds. I would rather get that money up-front in each paycheck.
    - Steve
     
  3. brentl

    brentl Cinematographer

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    and I'm the opposite! I'd rather take $30 less a week, and get a cheque for $1560 dollars.
    That may be because I have trouble saving money [​IMG]
    Brent L
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  4. Bill Catherall

    Bill Catherall Screenwriter

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    I'm pretty sure you can claim as many exemptions as you want on your W4 with no penalty. The only time the IRS is going to get you is if you don't pay up at tax time. Personally, I don't plan ahead enough and will never have the money available if I had to owe every year. So I usually try to adjust things so I don't get too much back, but just a little. However, I can never tell far enough in advance how much I'm going to have by way of deductions to be able to compensate by claiming more exemptions and come out even. I usually get a couple thousand back at tax time. But it is a good idea to try not to let the IRS "borrow" more than they should. It's like putting the money into a non-interest bearing savings account that you can't touch. So when you get that money back from the government, it's worth less than if it wasn't taken from you in the first place.
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  5. Craig Chatterton

    Craig Chatterton Stunt Coordinator

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    I looked into this a couple of years ago. I wanted to do the same thing - decrease my withholdings and put the same money into my own savings account so *I* could earn the interest until April. But I found that if you do that two years in a row, the IRS will make you "estimate" your income by filling out a tax form four times a year! (Once per quarter). I decided it wasn't worth doing that. [​IMG]
    I'd recommend you talk to a tax advisor though. I may not be remembering this correctly...
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  6. Marvin

    Marvin Screenwriter

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    I think it's ok to do unless you owe TOO much, possibly two years in a row as has been mentioned. I'm not sure exactly what TOO much is; maybe 1 or 2% of something or other.
     
  7. Tom Meyer

    Tom Meyer Second Unit

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    Uh, I'm single w/ no dependents yet I use 4 exemptions on my federal taxes and I *still* usually get back around $1000 each year. I've been doing this for at least 5 years and haven't heard anything from the IRS.
    My friend the CPA does my taxes and has charts *from* the IRS that let you reverse-engineer your net income to get the number of excemptions you should take in order to get as close to break-even as you want to get.
    [Edited last by Tom Meyer on November 07, 2001 at 12:16 PM]
     
  8. Tim Markley

    Tim Markley Screenwriter

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    It is perfectly legal to take as many deductions as you wish. The thing you have to avoid is paying too little taxes. If you come up way short then they may make you pay quarterly estimated taxes. I'm much happier getting back $0 at tax time then getting back a couple thousand.
     
  9. John Tillman

    John Tillman Supporting Actor

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    I'm not a tax advisor but to my way of thinking, I'd rather not find myself without the funding to pay whats owed. If it means loaning the gov my money during the year, then so be it. The silver lining is getting your wad of cash back, to do as you please.
     
  10. Ryan Wright

    Ryan Wright Screenwriter

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  11. Mark Schermerhorn

    Mark Schermerhorn Second Unit

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    I remember reading in the 1040 pamphlet that there IS a penalty if you end up owing over a certain % of your income in taxes. So if you gross 100k a year and only have a few thousand deducted, you'll be in trouble. I can't remember what the number is, though.
     
  12. Denward

    Denward Supporting Actor

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    There is a penalty for having too little withheld. The calculation is on the 1040 form (or one of the schedules). If I remember right, it's at the end after you calculate how much you owe. I think it's one of those sections you only fill out if you owe taxes. The test basically compares this year's withholding to last year's tax bill. If you owe, the test says your current year withholding should be about the same as last years taxes unless you made a lot more money this year than last.
     
  13. RicP

    RicP Screenwriter

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  14. Nathan_F

    Nathan_F Second Unit

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    I know people who actually "claim" 99 exemptions for withholding to make the regular withholding 0. Then working with their tax/financial advisor, the estimate their actual tax liability and update their w-4 monthly with an "additional withholding amount" to cover their liability.
     
  15. Kevin Coleman

    Kevin Coleman Second Unit

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    Thanks alot guys, alot of good ideas.
    Kevin C. [​IMG]
     
  16. Mark Dubbelboer

    Mark Dubbelboer Screenwriter

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    Ric points out a great point.
    all my friends also consider it "free money"
    i offer to hold this free money for them all year and give it back to them at tax time if it's so free...so far no takers tho
     

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