What Can the IRS Do if You Inflate Your W-4 Allowances?
Let’s say you adjust your W-4 so that you have less
income tax withheld from your paychecks (or none at all). Then when April
rolls around, you file your 1040 and it says that
you owe a ton.
going to let you get away with that? Wasn’t the reason why withholding was
instituted in the first place to prevent you from owing your income tax in
one, in-your-face, anger-inspiring, lump sum at the end of the year?
has a couple of deterrents:
If you owe $1,000 or more in taxes when you file your
1040 and you owe more than 10% of the
total tax you owe for the whole year (or if you’re self-employed and you
neglected to file quarterly returns), the
may hit you with an “Estimated Tax Penalty.” (But there are lots of valid
excuses, exceptions, and caveats. See this article for instance.)
The penalty isn’t that bad as these things go — some people are even
willing to swallow it because they think they can beat the penalty with
the rate of return on the investments they’re buying with the money
they’re not sending to Washington. If you want to see how the penalty is
calculated, take a look at the following
Form 2210 &
Form 2210 Instructions.
may decide to stop allowing you to file your own
W-4 form. More accurately: they may demand
that your employer ignore any W-4 forms you
file and accept a W-4 form the
files on your behalf instead. At this point, in order to keep taxes from
being withheld from your paycheck you either need to get another job, or
you need to convince your employer to risk civil disobedience.
Not much of a stick. The carrot, for you as an employee, is mostly that if you
have your withholding set to pretty much match what you owe, you don’t have to
think about it much, and there’s no big tax bill in April. If you’re feeling a
little sick inside when you see part of every paycheck being sucked into the
Pentagon, though, that’s not likely to be sufficient comfort.
Among the entities who aren’t paying the taxes the federal government says
they owe to the federal government is… wait for it…
the federal government.
“As of ,” according to
TIGTA, “Federal Government entities owed approximately $45
million in delinquent employment taxes” (you can add to that another $254
million that state and local governments are neglecting to kick back to
The report adds: “It is critical to the image of the United States that
Federal Government entities be held to the same standards as private
policy prohibits the use of enforcement actions, such as the filing of liens
or levies, against Federal entities. Thus, the ability of the
enforce collection of delinquent taxes from Federal Government entities is
And so it should not surprise you that somehow the “pay what the
we owe” item keeps getting left out of these federal government agencies’
budgets (or, as the report puts it, “in general, Federal Government agencies
cannot use current funding to satisfy debts properly chargeable to a prior
[In o]ur review… 99 entities owing $5.8 million had been assigned for
resolution for more than 1 year. More than $1 million of the $5.8 million
related to tax years and earlier. As
discussed previously, as of ,
143 Federal Government entities still had not filed 750 required tax returns.
Further, 466 (62 percent) of the 750 unfiled returns related to tax periods
at least 3 years old. The continued existence of significantly aged
delinquent Federal Government entity accounts, despite the
[sic] repeated attempts to secure repayment, raises the possibility
that these entities may simply not have the funding available to satisfy
The report recommends that “The Director, Collection,
Division, should continue ongoing efforts to develop a process for resolving
aged delinquent Federal Government entity accounts.” When a recommendation
includes a phrase like “should continue ongoing efforts to develop a process
for resolving” you know it’s doomed.
Remember a few weeks back when I
reported that the Pope would soon be issuing a “doctrinal pronouncement”
condemning tax evasion?