W-4 Exempt and Estimated Taxes

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dissonance
Posts: 33
Joined: Wed Feb 13, 2013 9:51 pm

W-4 Exempt and Estimated Taxes

Post by dissonance »

Are there any negative consequences to claiming exempt on your W-4 and making quarterly estimated tax payments of 100-110% (depending) of last years tax liability (to avoid penalties/interest)?
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dodecahedron
Posts: 6607
Joined: Tue Nov 12, 2013 11:28 am

Re: W-4 Exempt and Estimated Taxes

Post by dodecahedron »

Read the language on your W-4. Claiming "exempt" on your W-4 requires that you certify ("under penalty of perjury") that you had no tax liability last year or this year.

Obviously you DID have liability last year given that you are talking about making safe harbor estimated payments of 100% to 110% of last year's liability.

Yes, there can indeed be negative consequences for making false statements to the IRS under penalty of perjury. See the link below.

http://www.law.cornell.edu/uscode/text/26/7206
nordsteve
Posts: 1104
Joined: Sun Oct 05, 2008 9:23 am

Re: W-4 Exempt and Estimated Taxes

Post by nordsteve »

Why not do the opposite -- make all of your tax deposits via withholding, and skip the estimated tax deposits?
nordsteve
Posts: 1104
Joined: Sun Oct 05, 2008 9:23 am

Re: W-4 Exempt and Estimated Taxes

Post by nordsteve »

Also note this guidance to employers regarding withholding -- http://www.irs.gov/Individuals/Withhold ... -&-Answers -- particularly the lock-in letter.
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