Quoted: People want to give the gov an interest free loan is why.

Quoted: And because you filled out your W-4 incorrectly.

There's your answer.

Quoted: Quoted: Quoted: People want to give the gov an interest free loan is why. Quoted: And because you filled out your W-4 incorrectly. There's your answer. Not necessarily. We get lots of overtime, bonus, and other incentives.  The OT hours for a given pay period might put you in a higher withholding bracket for that pay period.  I once figured it was not worth more than about 9 or 10 hours a week for after that, you actually take home less by getting into a higher bracket.   We just got several thousand dollars on a psuedo-stock option (our company doesn't have stock, it's a wierd story).  After they lumped it in with our paycheck, the withholding was stupendous.  It will all level out and at the end of the year, I get back the part that was withheld due to the larger paychecks.

That's why you claim the highest possible deduction on you W-4. If you get bonuses and such, you will just end up paying at tax time. Every permanent job I've had I was always salary plus bonus/commission. Bonuses are typically 2X my salary. I claim the highest possible deduction. Come tax time I end up paying. No interest free loan to Uncle Sam

Although I am getting money back this year for being a Hurricane victim. At least for sure on LA state income tax I paid.

When you fill out a W-4 form, you are giving your employer the number of dependent persons that you anticipate being able to claim as exemptions at the end of the year.  They use this information to help them >ESTIMATE< the amount of taxes that you will owe at the end of the year.  They use these estimates to determine how much money to withhold from your check and send off to the IRS.

At the end of the year, after all of your paperwork is in and you have the EXACT figures of what you made, what you spent, etc., you can figure out your tax obligation, and then compare that to the money that was actually withheld and given to the IRS.  If everything went as designed, those numbers will be fairly close, within a couple hundred bucks either way.  If you owe, you pay, and if you overpaid, you get a refund check for the overpaid amount.

But many people choose to "play" with their number of dependants to manipulate how much money is withheld by their employer.  Some folks claim ZERO dependants on their W-4, which means that their employer increases the amount of money withheld and sent to the IRS.  At the end of the year, these people get a "return", meaning they get back the money they overpaid.  Effectively, they gave the IRS an interest-free loan of their money.

Other people claim a much higher number of dependants (say, 10), which reduces the amount of money withheld, leaving them with larger paychecks each pay period, but also leaving them a debt to pay to the IRS at the end of the year, because their employer did not withhold enough from each check to cover their debt.  These people have to pay.

Sadly, far too few Americans understand this fairly simple process, and many actually believe that their tax return money is "free money", never bothering to question that 1/3-1/2 of their income went to paying their tax burden.

-Troy

You pay the same amount that you would throughout the year. You just feel it more cause its coming out in one lump sum. If you are paying every paycheck its just a trickle effect. Either way uncle sam gets his money.

I would just rather he wait a year.