lj2

So I'm just a-wondering....

1 - If your wife doesn't work, do you still get the allowances for "married filing jointly" on your tax return?

and

2 - There are obviously penalties for deliberate false declarations on your W4 to have too little tax withheld. Does anyone know whether there are penalties for deliberately making declarations which result in too much tax being withheld?

All thoughts welcome...

Michael

1. Yes.
2. No. Actually there isn't any penalties either way. However if too little tax is withheld, there may be penalties for under payment, However even if you under withhold by more the $1,000, there are several other situations that have to occur before you would incur penalties for under payment. The W-4 is just a best guess estimate and you can change it through out the year as bonuses, employee stock options, capital gains, dividends, interest, etc. are paid during the year. Therefore be careful with bonuses and stock options since they normally don't use the W-4 to withhold taxes but normally withhold a flat rate so the amount withheld could be too much or too little.

So even though the W-4 is for earned income, you can use it instead of estimated tax payments for other things. In fact the W-4 doesn't go to the government but only to your employer.

I used to use the W-4 whenever I had large capital gains, bonuses, or exercised stock options and didn't want to file estimated tax payments, so I may have changed it 2 or 3 times a year.

ian-mstm

AFAIK, Yes.


I don't think there are. The IRS is always glad to have more money than they might otherwise be entitled to... loathe though they are to give it back to you when you file your return.

Ian

Bob

You ideally don't want to be paying more tax and waiting to get a refund because you are giving the government a interest free loan on the sum.

lj2

Thanks guys - Really appreciate all of the above responses which clear up my wonderings!

Also, I fully understand your point Bob and realise I know would be all I was doing. What it would mean to us, however, is living on a deliberately understated wage in order to get a lump sum payment back at the year end. This would then pay for flights hom / a holiday. Entirely the wrong thing to do from an interest/cashflow point of view and it would be absolutely better to accurately declare and transfer the difference each month into a savings account thus having the same effect but allowing us any interest benefits and allowing us also the ability to access th cash in an emergency.

Sadly, I know me and my family, and I think we will probably sacrifice the sensible route in order to ensure we don't 'dip into' those funds! So, a bad decision, taking knowingly I think it's fair to say...

Michael

Many people over withhold since if they get the money, it burns a hole in their pocket and they can never save.

The only thing that you could possibly have an issue with is too much state income tax withheld if you itemize deductions (although you can request federal and state to be different). When itemizing deductions, you can deduct state income taxes paid (withheld) from federal returns and if you get a state income tax refund, that will be income on the following year on your federal return.