5 ms·

> Overpaying: so the IRS issues a refund. That's part of the process. Isn't this a 1 way street where the IRS wins? For example, if you underpay don't you hav

by nickjj 4y ago

> Overpaying: so the IRS issues a refund. That's part of the process. Isn't this a 1 way street where the IRS wins? For example, if you underpay don't you have to pay interest at a set rate for the whole year you underpaid where as if you over pay you'll get interest from April 15th until the time it takes to receive your refund which might be a few days or a couple of weeks?

brewdad 4y ago
If you overpaid, why would you wait until April 15 to ask for your money back if your biggest concern is not giving them an interest free loan? I filed in February and had my refund in about a week.
- nickjj 4y ago
  > why would you wait until April 15 to ask for your money back if your biggest concern is not giving them an interest free loan? It's not always possible to file accurately that early. A number of investment related tax documents don't come until March 15th at the earliest. Then you probably need to wait for your accountant to prepare everything, you review everything and finally you officially file it. For me personally this usually happens near the end of March. Realistically it can't be any earlier. Also, if you're self employed chances are you're paying quarterly estimated taxes to avoid penalties. You're giving them money as early as a few months into the tax year. You also need to make sure you don't underpay or you can get penalties and you also owe interest. You either give the IRS an interest free loan by overpaying throughout the year or risk losing money.
wolfgang42 4y ago
If you file on time but underpaid estimated taxes, you only get a penalty if it’s more than than the greater of $1000 or 10%, and a variety of other conditions don’t apply (not tax advice, see Form 2210 for the gory details). For the average citizen, a little bit of opportunity cost is much less important than the costs of getting hit by a surprise bill, so it makes sense to err a little bit on the side of overpayment when filling out your W-4.

by nickjj 4y ago

brewdad 4y ago

If you overpaid, why would you wait until April 15 to ask for your money back if your biggest concern is not giving them an interest free loan? I filed in February and had my refund in about a week.

nickjj 4y ago
> why would you wait until April 15 to ask for your money back if your biggest concern is not giving them an interest free loan? It's not always possible to file accurately that early. A number of investment related tax documents don't come until March 15th at the earliest. Then you probably need to wait for your accountant to prepare everything, you review everything and finally you officially file it. For me personally this usually happens near the end of March. Realistically it can't be any earlier. Also, if you're self employed chances are you're paying quarterly estimated taxes to avoid penalties. You're giving them money as early as a few months into the tax year. You also need to make sure you don't underpay or you can get penalties and you also owe interest. You either give the IRS an interest free loan by overpaying throughout the year or risk losing money.

wolfgang42 4y ago

If you file on time but underpaid estimated taxes, you only get a penalty if it’s more than than the greater of $1000 or 10%, and a variety of other conditions don’t apply (not tax advice, see Form 2210 for the gory details). For the average citizen, a little bit of opportunity cost is much less important than the costs of getting hit by a surprise bill, so it makes sense to err a little bit on the side of overpayment when filling out your W-4.