W-4 Questions

[Nomad84]

Just to be clear, since I'm not sure we're talking about the same thing...

1) Claim a ton of allowances so you have zero withholding.
2) Place tax money in savings account/money market fund.
3) Change W-4 late in the year to withhold all or most of your pay. Use money from savings for your expenses.
4) In April, pay the rest of the taxes you owe.

By doing this, you earn interest on your tax money as long as possible. It's an interest free loan from the government. You do have to have a certain amount of money withheld before the end of the year to ensure that you don't get hit with penalties. I don't remember the criteria here, but you can look them up. If you withhold at least as much as your total tax liability last year, you'll be fine. Again, make sure you get your final payment in by the deadline in April. Short version:

1) Borrow money from the government at 0%
2) Use the money for risk free investments
3) Profit

[Brettster]

Nomad, regards to changing my w-4 late in the year, so if I had 9 allowances at the time, change my w-4 to zero allowances?

[Big TR]

If you have 9 allowances for most of the year, you are going to have to change to 0 allowances plus have your employer withhold additional money.

[jaydub]

[ QUOTE ]
Short version:

1) Borrow money from the government at 0%
2) Use the money for risk free investments
3) Go to jail for tax fraud?

[/ QUOTE ]

Not sure of the actual risk of prosecution but this link should be required posting with any such advice:

The mission of the Withholding Compliance program is to ensure that taxpayers who have serious under-withholding problems are brought into compliance with federal income tax withholding requirements.

I'm not saying it's illegal, all I'm saying is that the quick google hits to support this are the same nutters ranting about taxes being optional and the IRS appears to have a program to stop such activity.

J