Question about going tax exempt on mulitple pay periods

fatman2fitman1982

Hello,
At my job, I usually go tax exempt twice a year (I want money now and just take it off for tax time), but this year I did it 4-5 times. Can I get in any legal trouble for doing it 4-5 times a year? I usually get pretty nice refunds even for going tax exempt twice a year.

Thanks

amdahwd

You shouldnt get in trouble as long as you are not going to owe a lot of money to the IRS when its time to file your taxes.

fatman2fitman1982

I think I should still get a small refund, at worst I think it would even out.

I just wasn't sure if you get a penalty just because you go tax exempt when you shouldnt/dont qualify.

MzBug

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th. Other payroll deductions (like insurance), if not paid on schedule could cause a lapse in coverage or a loss of coverage.

PBsMommy

I work in governmental payroll and honestly I am not quite sure if the "rules" change for regular payroll, as I have only worked governmental. We encourage our clients not to let their employees do this because the city/county can actually be held liable by the IRS for any underwithholdings. However, there have been a few employees' that still go exempt here and there like you do. I do not believe you can get in legal trouble doing this, as long as your employer is still withholding your medicare and ss withholdings. The best thing to do is check out the IRS website just to make sure... http://www.irs.gov/

teampugador

I am an accountant and sometimes cover for our payroll clerk. You will not get in any legal trouble, but you may end up owing depending on your "regular" withholdings.

neverstray

I used to own my own business, i dont think you really are supposed to do this, and frankly, I don't understand why you do it that way. That's weird. Just increase your exemptions to flatten it throughout the year so you wind up owing as close to zero as possible. There are tools the IRS provides for calculating this. This puts the additional money in your pocket all year. I think at one point, I used to exempt up to 9, or whatever the legal limit was at that time, and still got back 5 digits. I hate the IRS more than probably anyone. It truly is extortion. But, play within the rules. They always win, in the end.

fatman2fitman1982

I used to own my own business, i dont think you really are supposed to do this, and frankly, I don't understand why you do it that way. That's weird. Just increase your exemptions to flatten it throughout the year so you wind up owing as close to zero as possible. There are tools the IRS provides for calculating this. This puts the additional money in your pocket all year. I think at one point, I used to exempt up to 9, or whatever the legal limit was at that time, and still got back 5 digits. I hate the IRS more than probably anyone. It truly is extortion. But, play within the rules. They always win, in the end.

I do it so I get my money in advance. Some weeks were heavy with OT hours so I wanted all of it. I know that it comes out of my refund in April. I was just questioning whether this is legal or not.

WendyTerry420

Hello,
At my job, I usually go tax exempt twice a year (I want money now and just take it off for tax time), but this year I did it 4-5 times. Can I get in any legal trouble for doing it 4-5 times a year? I usually get pretty nice refunds even for going tax exempt twice a year.

Thanks

No, you could actually *legally* claim exempt all year. It isn't advisable though because then you end up with a big bill on 4/15!

TylerJ76

I used to own my own business, i dont think you really are supposed to do this, and frankly, I don't understand why you do it that way. That's weird. Just increase your exemptions to flatten it throughout the year so you wind up owing as close to zero as possible. There are tools the IRS provides for calculating this. This puts the additional money in your pocket all year. I think at one point, I used to exempt up to 9, or whatever the legal limit was at that time, and still got back 5 digits. I hate the IRS more than probably anyone. It truly is extortion. But, play within the rules. They always win, in the end.

I do it so I get my money in advance. Some weeks were heavy with OT hours so I wanted all of it. I know that it comes out of my refund in April. I was just questioning whether this is legal or not.

Legal? Maybe.
Silly? Absolutely

WendyTerry420

I work in governmental payroll and honestly I am not quite sure if the "rules" change for regular payroll, as I have only worked governmental. We encourage our clients not to let their employees do this because the city/county can actually be held liable by the IRS for any underwithholdings. However, there have been a few employees' that still go exempt here and there like you do. I do not believe you can get in legal trouble doing this, as long as your employer is still withholding your medicare and ss withholdings. The best thing to do is check out the IRS website just to make sure... http://www.irs.gov/

Claiming "exempt" on your W-4 has nothing to do Social Security/Medicare withholdings or local/state withholdings.

WendyTerry420

I used to own my own business, i dont think you really are supposed to do this, and frankly, I don't understand why you do it that way. That's weird. Just increase your exemptions to flatten it throughout the year so you wind up owing as close to zero as possible. There are tools the IRS provides for calculating this. This puts the additional money in your pocket all year. I think at one point, I used to exempt up to 9, or whatever the legal limit was at that time, and still got back 5 digits. I hate the IRS more than probably anyone. It truly is extortion. But, play within the rules. They always win, in the end.

I do it so I get my money in advance. Some weeks were heavy with OT hours so I wanted all of it. I know that it comes out of my refund in April. I was just questioning whether this is legal or not.

Yes, it's perfectly legal. And it makes perfect sense. The withholdings on OT weeks are probably too large for your personal situation. That's what happens to me as well. I work in the tax industry, which means about 6 weeks of heavy overtime, plus two months off, and two-three months of part-time hours. I claim exempt the whole year though because we always get a big refund. I used to be able to fill out a W-5 and get part of my "refund" added to my paychecks.

dmpizza

Its all OK as long as on April 15, you can pony up any discrepancy.

WendyTerry420

Legal? Maybe.
Silly? Absolutely

No, not silly at all. A lot of people do this because it makes sense for their personal tax situation.

agthorn

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

kmbweber2014

This year is going to be different than the previous years. You may not get as big of a refund as you have before due to tax benefits expiring, and changing. Many of the child tax credits and things of that nature will be changing and you will not get as much.

AnninStPaul

Hello,
At my job, I usually go tax exempt twice a year (I want money now and just take it off for tax time), but this year I did it 4-5 times. Can I get in any legal trouble for doing it 4-5 times a year? I usually get pretty nice refunds even for going tax exempt twice a year.

Thanks

No, you could actually *legally* claim exempt all year. It isn't advisable though because then you end up with a big bill on 4/15!

This is not true - if you do not have enough withheld to cover your tax liability for the year, you may owe penalties. For example, those subject to the AMT (alternative minimum tax) have to make quarterly estimated payments for the amount by which they will be underwithheld for the year in order to avoid penalties.

Also...depending upon how manual the system is (if you or they are doing the data entry), you are not making friends in your payroll department.

AnninStPaul

This year is going to be different than the previous years. You may not get as big of a refund as you have before due to tax benefits expiring, and changing. Many of the child tax credits and things of that nature will be changing and you will not get as much.

for 2013, not 2012

agthorn

This year is going to be different than the previous years. You may not get as big of a refund as you have before due to tax benefits expiring, and changing. Many of the child tax credits and things of that nature will be changing and you will not get as much.

If/when those go into effect, they're always forward-looking (i.e. for income earned in 2013, not 2012).

fatman2fitman1982

I used to own my own business, i dont think you really are supposed to do this, and frankly, I don't understand why you do it that way. That's weird. Just increase your exemptions to flatten it throughout the year so you wind up owing as close to zero as possible. There are tools the IRS provides for calculating this. This puts the additional money in your pocket all year. I think at one point, I used to exempt up to 9, or whatever the legal limit was at that time, and still got back 5 digits. I hate the IRS more than probably anyone. It truly is extortion. But, play within the rules. They always win, in the end.

I do it so I get my money in advance. Some weeks were heavy with OT hours so I wanted all of it. I know that it comes out of my refund in April. I was just questioning whether this is legal or not.

Yes, it's perfectly legal. And it makes perfect sense. The withholdings on OT weeks are probably too large for your personal situation. That's what happens to me as well. I work in the tax industry, which means about 6 weeks of heavy overtime, plus two months off, and two-three months of part-time hours. I claim exempt the whole year though because we always get a big refund. I used to be able to fill out a W-5 and get part of my "refund" added to my paychecks.

Thanks for the reply. I went exempt on big pay periods since I will go into a larger tax bracket during those weeks. I usually go exempt 2-3 times a year, but this year it was 5.

WendyTerry420

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

agthorn

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

Maybe, maybe not. I'm not a tax advisor so I can't tell OP what's best for their situation. I can tell OP that there is a lot of factually incorrect information in this thread, as several people have repeated the "you're okay as long as you pay by April 15th" statement. I wouldn't go to H&R block with questions about dieting, and I wouldn't come to MFP for tax advice.

WendyTerry420

Hello,
At my job, I usually go tax exempt twice a year (I want money now and just take it off for tax time), but this year I did it 4-5 times. Can I get in any legal trouble for doing it 4-5 times a year? I usually get pretty nice refunds even for going tax exempt twice a year.

Thanks

No, you could actually *legally* claim exempt all year. It isn't advisable though because then you end up with a big bill on 4/15!

This is not true - if you do not have enough withheld to cover your tax liability for the year, you may owe penalties. For example, those subject to the AMT (alternative minimum tax) have to make quarterly estimated payments for the amount by which they will be underwithheld for the year in order to avoid penalties.

Also...depending upon how manual the system is (if you or they are doing the data entry), you are not making friends in your payroll department.

The bolded part is the crux of the matter. If you *normally* get a refund, and *normally* have zero liability, or only a small liability, then withholdings only increase your refund. For example, if I didn't claim exempt on my W-4, then the tax refund would be close to $20k.

TylerJ76

TAX advice on MFP....


Awesome..

WendyTerry420

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

Maybe, maybe not. I'm not a tax advisor so I can't tell OP what's best for their situation. I can tell OP that there is a lot of factually incorrect information in this thread, as several people have repeated the "you're okay as long as you pay by April 15th" statement. I wouldn't go to H&R block with questions about dieting, and I wouldn't come to MFP for tax advice.

I'm basing it on OP's reference to occasional OT and the statement, " I usually get pretty nice refunds."

Espressocycle

Only if you fell behind enough to have needed to make installments, in which case you will have a fine.

agthorn

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

Maybe, maybe not. I'm not a tax advisor so I can't tell OP what's best for their situation. I can tell OP that there is a lot of factually incorrect information in this thread, as several people have repeated the "you're okay as long as you pay by April 15th" statement. I wouldn't go to H&R block with questions about dieting, and I wouldn't come to MFP for tax advice.

I'm basing it on OP's reference to occasional OT and the statement, " I usually get pretty nice refunds."

Yes, and now they have a different situation, so unless you're looking at their numbers you don't know how it has affected their overall tax situation, and people telling them that they'll be fine as long as they pay the full balance by April 15th have no idea if that's true or not.

WendyTerry420

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

Maybe, maybe not. I'm not a tax advisor so I can't tell OP what's best for their situation. I can tell OP that there is a lot of factually incorrect information in this thread, as several people have repeated the "you're okay as long as you pay by April 15th" statement. I wouldn't go to H&R block with questions about dieting, and I wouldn't come to MFP for tax advice.

I'm basing it on OP's reference to occasional OT and the statement, " I usually get pretty nice refunds."

Yes, and now they have a different situation, so unless you're looking at their numbers you don't know how it has affected their overall tax situation, and people telling them that they'll be fine as long as they pay the full balance by April 15th have no idea if that's true or not.

It sounds like the difference is simply a little more OT. Unless it came with a big pay raise, it takes more than a few weeks on OT to change your refund from "pretty nice" to nil.

agthorn

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

Maybe, maybe not. I'm not a tax advisor so I can't tell OP what's best for their situation. I can tell OP that there is a lot of factually incorrect information in this thread, as several people have repeated the "you're okay as long as you pay by April 15th" statement. I wouldn't go to H&R block with questions about dieting, and I wouldn't come to MFP for tax advice.

I'm basing it on OP's reference to occasional OT and the statement, " I usually get pretty nice refunds."

Yes, and now they have a different situation, so unless you're looking at their numbers you don't know how it has affected their overall tax situation, and people telling them that they'll be fine as long as they pay the full balance by April 15th have no idea if that's true or not.

It sounds like the difference is simply a little more OT. Unless it came with a big pay raise, it takes more than a few weeks on OT to change your refund from "pretty nice" to nil.

Everything you've just said is pure guessing. I'm certainly not going to base my tax strategy on bad information and strangers guessing at my financial information, and neither should OP. I'm surprised that you're still arguing with me about this.

WendyTerry420

If it is just the standard payroll taxes you will be ok as long as your entire tax obligation is paid by April 15. They don't care when you pay them, just that you pay them by the 15th.

This is absolutely not true. There can be penalties for under withholding. http://www.ehow.com/facts_5855417_penalty-underwithholding-taxes_.html

Moral of the story - get your tax advice from a tax advisor, not a weight-loss site.

This would not effect the OP though.

Maybe, maybe not. I'm not a tax advisor so I can't tell OP what's best for their situation. I can tell OP that there is a lot of factually incorrect information in this thread, as several people have repeated the "you're okay as long as you pay by April 15th" statement. I wouldn't go to H&R block with questions about dieting, and I wouldn't come to MFP for tax advice.

I'm basing it on OP's reference to occasional OT and the statement, " I usually get pretty nice refunds."

Yes, and now they have a different situation, so unless you're looking at their numbers you don't know how it has affected their overall tax situation, and people telling them that they'll be fine as long as they pay the full balance by April 15th have no idea if that's true or not.

It sounds like the difference is simply a little more OT. Unless it came with a big pay raise, it takes more than a few weeks on OT to change your refund from "pretty nice" to nil.

Everything you've just said is pure guessing. I'm certainly not going to base my tax strategy on bad information and strangers guessing at my financial information, and neither should OP. I'm surprised that you're still arguing with me about this.

No, it's based on knowledge of the tax code.

corn63

OP in one year: the IRS put a lien on my house. They said I owed back taxes! The people on MFP said I'd be okay!


Oi. Lots of people here are knowledgeable in many things, but I'd go to the professionals for this one. Especially one I can look at in the face and see their credentials on the wall.


My personal agenda that has nothing to do with this thread: If you end up not having a refund, that's awesome. Why give the government a tax free loan of your money that YOU earned? I don't understand wanting a refund. The smaller the refund, the less money the government has a hand in your finances.