[Meeka]

Please be kind..

[Justin]

Eventually the IRS will flag you and you’ll be forced to claim zero on your salary. I managed a high performance sales team for a bit and some of my reps got salty 43% of their monthly bonuses were getting taken between income tax (25%), fica, 401k, etc so they made themselves exempt to plow the 25% into stocks.

I didn’t hate the play, but all of them ended up in IRS hell at the end.

[Skylar]

CPA/tax accountant here. As mentioned above, you “may” be subject to an “under payment penalty” which is determined using a formula based on pre iois years tax and current year income and withholding/estimates. I have clients willingfully pay the penalty in order to keep more of their paycheck and invest it.

It takes discipline, and a bit of risk, but depending on your financial situation, it can be done.

In a recent client example. A client decided not to pay in 20k thought the year, owed 20k on their tax return and had a penalty of about $1.2k. He is confident his financial advisor will make him atleast 10%. So he pays the penalty every year and as soon as I tell him how much tax he owes, his financial advisor sells whatever and send him the money needed for him to pay his taxes.

I always advise against this strategy as I feel it my job to prevent from paying penalties. But he is happy doing it and feel he is getting an advantage over “the system”.

If you work closely with a competent tax preparer to determine what your potential penalties will be, you can calculate different scenarios and make a decision for yourself.

[Author]

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