How To Shrug — A Legal Tax Protest That Might Make A Difference
I say it’s time for some folks to put their money where their mouths are.
One of the links in the compilation is to a post of Bryan Pick @ QandO:
“I’d be more impressed if they fired a shot across the bow and coordinated a national day for cranking up their withholding allowances, just as high as they can. They’re planning their next party on Tax Day, right? One might think they’d be interested in ceasing to lend their earnings interest-free to the government. They might take some satisfaction in doing something that actually shows up on the government’s ledger.”
I think that’s a damn good idea. There’s only one problem with it:
While the feds don’t mind if you over-withhold your taxes, giving them an interest-free loan all year long, they tend to get a bit upset if you under-withhold. They tend to assess penalties, charge interest, and if they think it’s an egregious enough offense, jail time can be involved. But it’s relatively easy to get around the penalties. You can under-withhold and get away with it, as long as you keep it reasonable. The general rule I’ve seen quoted is that as long as you withhold 90% of your tax liability, you’re pretty safe.
Tax day is coming up. Assuming your earnings are pretty similar to the previous year, it’s pretty simple to estimate your tax liability. It’s also pretty simple to estimate your withholding. There are several free calculators online to do it for you, including one from the IRS. How handy!
But I’ll make it even easier. I consulted a tax preparer that I’ve known for years, and he’s provide a relatively simple rule of thumb that should serve you well. When it comes time to fill out your W-4, assuming you’re a salaried employee, here’s what you do:
- Count yourself: Me
- Count yourself again: Myself
- Count yourself again: I
- Count your spouse (if you have one)
- Count each of your dependents (if you have them)
Me, Myself, and I, then one for your spouse and one for each dependent.
For me, I have me, myself, and I, which is three. I have a wife, making four. And I have one child and one on the way (who will arrive in 2009), so there’s two more, giving me a total of 6. This is 1-2 more than the standard W-4 form suggests that I claim, so I’ll under-withhold, but should be close enough to my actual tax burden to avoid penalties.
So here’s my suggestion. April 15th, go to your HR department and change your W-4 claimed exemptions. Go with the maximum exemptions that you calculate will keep you from over-withholding, but small enough to avoid penalties. Budget (save or invest) the difference, so that you can pay the necessary tax next April, and don’t dare postmark the check to them before April 14, 2010.
It’s not a big difference. But if enough people do this, it will be big enough to be noticed. The federal government is expecting to spend your money as soon as it comes in; they’re not expecting to wait until next April to get your money. In fact, if they have to wait, they’re likely to get angry. That’s more money they have to borrow today. That’s more of a functional deficit on their books. In short, if you want to get noticed, a far more effective way than getting some friends together for a group protest is to hit them where it hurts: the balance sheet.
Fellow Americans, it’s time to stop being doormats. If you really want to show the government that you’re angry, it’s far better to show them than to tell them.
Tell your family, tell your friends, tell your blog readers, tell your coworkers. April 15th is the American W-4 Party.