Not withholding tax?

[anbuitachi]

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Might be a dumb question, but any of you do this? I figure not having your hospital withhold your tax gives a significant temporary boost to investable income. Even if you put it in a high saving account and get 2% interest.. can still get like 1000$ extra a year? Then just pay the taxes due during tax season.

Am i missing something?

 

[deleted171991]

You are. The federal government makes you pay penalties if you don't pay 90% of your income taxes throughout the year. And they are much higher than 2%/year. No fun.

Topic no. 306, Penalty for underpayment of estimated tax | Internal Revenue Service

Topic no. 306, Penalty for underpayment of estimated tax

www.irs.gov

 

[Section31]

Instead of withholding nothing, you should instead try and calculate how much tax you think you will owe based on income, family size, deductions, etc. then adjust your withholding accordingly.

That way you get your “refund” (the interest free loan you give the govt) throughout the year instead of waiting until the next April.

 

[Mman]

You are. The federal government makes you pay penalties if you don't pay 90% of your income taxes throughout the year. And they are much higher than 2%/year. No fun.

Topic no. 306, Penalty for underpayment of estimated tax | Internal Revenue Service

Topic no. 306, Penalty for underpayment of estimated tax

www.irs.gov

The government's penalties are also calculated on a daily basis. I've had years where I had a lot higher income in the 2nd half of the year than the 1st and ended up having to pay penalties because my 1st and 2nd quarter estimated taxes were not high enough compared to my end of year income. They calculate what you should have paid each quarter and then tack on a penalty based on how underpaid that quarter was even if your end of year ends up correct.

 

[pjl]

You have to pay 110% the prior year taxes to avoid penalties, unless you actively calculate how much you are going to owe at the end of the year and keep up with quarterly payments. Otherwise, the daily penalties.

 

[CommonMan]

You would be committing tax fraud when you fill out the W-3 and claiming exempt status. Your employer would be required to send the W-3 to the IRS. There goes your medical license. All for 100$ in additional investment income. Seriously, you need to establish a relationship with a good CPA, you are a dumb doctor deal waiting to happen.