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Old 01-24-2013, 10:33 AM   #1
NeutralNovice
Earning My Ears
 
Join Date: Jul 2011
Location: San Francisco Bay Area
Posts: 48

Income Tax Question - Better to claim exempt then pay later?

For all of my working life so far, I have always claimed Single-0-0, thus, I have no exemptions whenever I receive my paycheck. I always get a refund after I file so basically, the government is the one holding my money, to which I earn no interest.

Can someone explain to me if this scenario makes sense and if it would end up working out more over the long run?

Scenario:

If I claim exempt on my checks all year and pay no Federal Income Tax and then simply put what I would have been taxed into a high yield savings account without touching the money for a whole year, would I end up getting more money overall since all I would be paying is my exact tax liability with the leftovers being all mine?

I mean, I would assume so, since the interest would be the increased difference; however, are there any caveats to claiming exempt? For example, at the end of the year, will I be somehow liable for more taxes than if I claimed 0?

A risk that I know of already, at least, would be the fact that since the money is already mine, that I might get tempted to dip into that "tax fund" and, thus, cause me issues at the end of the year.

Ugh, I wish I could me more concise and articulate on this matter--I hope my explanation of the scenario isn't confusing/badly worded.
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