Comment

Comment by Leslie on April 11, 2009 at 6:33pm

In principle I love this plan in reality the IRS will B%tch slap you right back.

to quote our friends at the IRS: "Federal income tax is not intended to be a once-a-year payment to the government. As a taxpayer, you are expected to be paying the tax in installments all year long. Your tax return should never be accompanied by an enormous check covering your entire yearly federal tax. In fact, this sort of procrastination will cost you.

The IRS penalizes taxpayers who have to pay more than 10% of their tax when they file their annual tax return. April 15th should not be thought of as a due date for an annual tax payment but as a deadline for assessing your yearly tax contribution and adjusting for any deficiencies or surpluses."

Under-payment of federal income tax

Under-payment of your tax will result in a penalty and added nuisance. If you are concerned that you may need to pay a penalty it is a good idea to fill out Form 2210 "Under-payment of Estimated Tax".

To make the completion of this form simple, have a copy of your current tax return in front of you. Most of the worksheet just asks you to transfer number from your tax return to the worksheet. The second part of the worksheet walks you through the computation of your penalty.

Typically, the penalty is the difference between 90% of what you should have paid and the amount you actually paid.

So if I should pay $5000 and I had $0 withheld I am going to have to pay $4500 [90% of what I should have paid] - $0 [what I did pay] = $4500 +$5000 so I am essentially doubling my federal income tax payment.

So this doesn't get them where it hurts it gets me where it hurts already, my wallet.