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Old 12-24-2019, 11:57 AM
 
12,333 posts, read 20,937,183 times
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Quote:
Originally Posted by Schuttzie View Post
I think some may do this as some sort of savings plan.
I know people who ‘say’ that, but it’s their blow through money plan.
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Old 12-24-2019, 12:36 PM
 
7,182 posts, read 3,365,778 times
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Its illegal to willfully file a W-4 with fraudulent information.

However, the reality is IRS is not going to bother with it unless they are charging you with all kinds of larger/other tax fraud issues.

If you get a refund or pay your taxes when due along with any penalty caused by under withholding they aren't likely going to bother with you.
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Old 12-24-2019, 12:39 PM
 
2,977 posts, read 1,137,951 times
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Quote:
Originally Posted by 51squirrel33 View Post
Hey, how did you do that? How 10 could have been claimed without proofs of people?
I got a refund every year because I had a lot of deductions and they were easily verifiable- mortgage interest, charitable deductions in cash, property taxes, etc. I would have had insanely large refunds if I had declared only 2 exemptions (myself and DS). Perfectly legal.

I had a coworker who was one of those people who liked to have a big refund so he could splurge with it every year- a big-screen TV or a family vacation. To me, he was lending money to the government interest-free.
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Old 12-24-2019, 02:17 PM
 
Location: Las Vegas & San Diego
996 posts, read 172,738 times
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Quote:
Originally Posted by 51squirrel33 View Post
Hey, how did you do that? How 10 could have been claimed without proofs of people?
The number of deductions on W-4 is not the same as number people - having significant deductions from mortgages, medical, etc. is a valid reason to increase deductions.

The only impact to having too many or too few is when file taxes - too many deductions can lead to a penalty for under withholding but the penalty is zero if meet set conditions and can ask to be waived.

I claimed 0 deductions for several years even with wife, 2 kids and significant mortgage because, with both DW and I working 2 jobs each, they would under withdraw to the point of penalty if I didn't.

Last edited by ddeemo; 12-24-2019 at 02:26 PM..
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Old 12-25-2019, 07:28 AM
 
Location: Northern NJ/Amagansett, NY
12,333 posts, read 10,715,714 times
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Quote:
Originally Posted by Blondy View Post
Its illegal to willfully file a W-4 with fraudulent information.

However, the reality is IRS is not going to bother with it unless they are charging you with all kinds of larger/other tax fraud issues.

If you get a refund or pay your taxes when due along with any penalty caused by under withholding they aren't likely going to bother with you.
Back when I used to have a very large amount of mortgage interest, my accountant had me claiming 9 exemptions. He said it was fine. Are you saying my accountant was having me do something illegal?

Even with 9 exemptions the government still owed me a lot of money at the end of the year.
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Old 12-25-2019, 07:58 AM
 
75,654 posts, read 75,072,635 times
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Quote:
Originally Posted by Blondy View Post
Its illegal to willfully file a W-4 with fraudulent information.

However, the reality is IRS is not going to bother with it unless they are charging you with all kinds of larger/other tax fraud issues.

If you get a refund or pay your taxes when due along with any penalty caused by under withholding they aren't likely going to bother with you.
There are lots of tests though for what is fraudulent ..in other words if you received a refund the prior year for over paying , claiming more exemptions the following year is not fraudulent . You have to actually be trying to defraud the govt .

https://www.browntax.com/Criminal-Ta...n-7205-a.shtml
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Old 12-25-2019, 09:39 AM
 
7,182 posts, read 3,365,778 times
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Quote:
Originally Posted by AnesthesiaMD View Post
Back when I used to have a very large amount of mortgage interest, my accountant had me claiming 9 exemptions. He said it was fine. Are you saying my accountant was having me do something illegal?

Even with 9 exemptions the government still owed me a lot of money at the end of the year.
Technically, its not the correct way to prepare a W-4 because there is a worksheet to account for deductions by dollar amount.

In your case, if you got a refund, there is no resulting tax fraud so IRS has no purpose in prosecuting you even if it was technically illegal.

If you willfully prepared the W-4 incorrectly and it resulted in a serious amount of W/H not being paid timely they could prosecute you. But, like I said, they aren't going to unless they are already pursuing a case of tax fraud against you for other reasons. They will instead deal with it administratively and send you a bill for an Estimated Tax Penalty if you don't self assess one when you file your return.
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Old 12-25-2019, 10:41 AM
 
27,281 posts, read 34,187,321 times
Reputation: 35024
Quote:
Originally Posted by Blondy View Post
Technically, its not the correct way to prepare a W-4 because there is a worksheet to account for deductions by dollar amount.

In your case, if you got a refund, there is no resulting tax fraud so IRS has no purpose in prosecuting you even if it was technically illegal.

If you willfully prepared the W-4 incorrectly and it resulted in a serious amount of W/H not being paid timely they could prosecute you. But, like I said, they aren't going to unless they are already pursuing a case of tax fraud against you for other reasons. They will instead deal with it administratively and send you a bill for an Estimated Tax Penalty if you don't self assess one when you file your return.

Turbo Tax literally advises folks to adjust their withholdings. There may be a "technical" infraction in the written guidelines, but the IRS does not give a hoot how many exemptions are claimed as long as they get their due.


https://turbotax.intuit.com/tax-tips...fund/L5HaySdDP
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Old 12-25-2019, 12:10 PM
 
7,182 posts, read 3,365,778 times
Reputation: 6343
Quote:
Originally Posted by ChessieMom View Post
Turbo Tax literally advises folks to adjust their withholdings. There may be a "technical" infraction in the written guidelines, but the IRS does not give a hoot how many exemptions are claimed as long as they get their due.


https://turbotax.intuit.com/tax-tips...fund/L5HaySdDP
That's basically what I said.

But, adjusting your exemptions to prevent a large refund is not the same as gaming the system to improve your cash flow by not paying up until the end of the year.

The legal requirement is pay as you go. If enough people started gaming the system not to pay until late in the year, you can bet the IRS would start flagging W-4's with X number of exemptions and imposing negative consequences.
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Old 12-25-2019, 03:18 PM
 
7,182 posts, read 3,365,778 times
Reputation: 6343
Quote:
Originally Posted by mathjak107 View Post
There are lots of tests though for what is fraudulent ..in other words if you received a refund the prior year for over paying , claiming more exemptions the following year is not fraudulent . You have to actually be trying to defraud the govt .

https://www.browntax.com/Criminal-Ta...n-7205-a.shtml
Agreed and the bottom line is did you withhold in total what was required to be withheld given all the caveats as well as did you withhold it or pay it through ES pymts at the time it was required to be withheld.

As to the second part re timing, that's a lot more labor intensive for the IRS to figure out imo based on info they currently receive and then the question becomes whether or not they will bother to determine the timeliness question.

If you're gaming the system for example and loading all your W/H in the second half of the year and you told a buddy or spouse whose now a disgruntled ex and they call the IRS tip line will they take some action against you? Who knows...... depends how much money is involved, whether or not they think they have a growing compliance problem in this arena, whether or not you are someone they can make an example out of for maximum publicity, etc.

Third party W/H is their bread and butter.....its cheap easy money for them. They don't take lightly being cheated out of getting it on time.
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