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

[deserrai]

Anyone able to verify a requirement to pay taxes on a quarterly basis?



Thank you everyone for your replies and help!

You must pay at least 90% of the current year tax or 100% of the prior year tax. You must pay it evenly throughout the year in quarterly estimated payments or you must pay it in federal withholding. Failure to do so results in an estimated tax penalty.

 

[tvguy]

The oversimplistic....but reality of it is, the government wants the tax money as soon as they can get it. So like everyone said, the ideal situation is to pay as you go and owe nothing, and get nothing back at the end of the year.

I used to be able to do that, by claming zero exemptions, and having a specific percentage of my pay withheld.
But they change the law and you can no longer have a percentage withheld, you have to use the withholding tables.

If I take 4 exemptions, I end up owing the feds about $1,000 and the state about $200.

If I take 3 exemptions, I get $1,000 back, and owe the state about $100. Why the federal and state witholding tables are so out of wack, i don't know.

 

[MinnieLovesMickey12]

Just one other tidbit of info just to clarify...if you make $100,000 a year or more you will be paying a 25% federal income tax, not 15%. That is the 2012 tax rate. You would pay close to $10,000 right off the bat and then you pay 25% tax on any income over $70,000. And that is for married filing jointly which is the lesser of the tax burdens.

If you are single your taxes jump to around $17,000 then 28% for anything over $87,000.