Suppose that Bob realizes in November that he has severely underwithheld taxes and would have a large penalty due when he files. Since he works at a salary-paying job, he elects to increase his additional withholdings to include his entire paycheck.

By the end of the year, his withholdings will then equal his total federal tax, and ostensibly he would have no penalty due when he files taxes.

In this scenario, the IRS would receive their money much later than if Bob had made four equal estimated tax payments. What discourages people from using this strategy on purpose?

  • 1
    It would probably be easier just to make an estimate tax payment. For those of us who do make regular estimated tax payments, it's because it's usually easier to make four smallish payments than one big one at the end of the year.
    – jamesqf
    Commented Apr 1, 2018 at 3:57
  • 2
    @james, if he makes an estimated tax payment in November, he would be subject to a penalty for underpayment of estimated tax, but withholding is treated as if it had been withheld in equal amounts throughout the year, even if it wasn’t.
    – prl
    Commented Apr 1, 2018 at 7:35
  • @prl: Not in my experience, though granted it's with business income rather than wages, so I really have no idea what my income is going to be until after I've made it.
    – jamesqf
    Commented Apr 1, 2018 at 17:43
  • @james, are you saying you filled out 2210 and there’s no penalty? Or you didn’t fill it out and you didn’t get audited so you think it’s okay?
    – prl
    Commented Apr 1, 2018 at 18:27
  • @prl: No, I'm saying that even though I make estimated tax payments of different amounts, the total paid always falls within the 90% of this year's, or 100% of last year's tax "safe harbor". Which is the only way a self-employed person like me can realistically do things. I am not a fortune teller: when I file the first estimated tax in April, I have no real idea how much I'm going to make the rest of the year. Some years it's been close to 6 figures, other years I might go a whole quarter with no income.
    – jamesqf
    Commented Apr 2, 2018 at 20:18

2 Answers 2


While that is an extreme example, it is permissible. The IRS considers all money withheld from paychecks as meeting the requirements for timeliness, as long as in the end you make the safe harbors.

People change jobs during the year, they have kids during the year, they get married during the year. So your tax situation may change during the year.

A number of years back I sold a rental property and I knew I was going to owe Federal taxes, so I made sure that the last few checks had additional funds to make sure that I meet the 110% safe harbor. The additional amount wasn't as extreme as your example, but it did increase my withhold by $500 a paycheck.

There are limits to this system. The number of allowances don't have to equal the number of kids, or the number of people in the household or any other rule-of-thumb. But if you try and set the number a huge number to drive your withholding to zero, the IRS may take notice:

If an employee claims more than 10 allowances on their Form W-4, does the employer have to report this to the IRS?


No, this requirement has been eliminated. However, Forms W-4, Employee's Withholding Allowance Certificate, are still subject to review. Employers may be directed (in a written notice or in future published guidance) to send certain Forms W-4 to the IRS. The IRS will also continue to review employee withholding compliance. The IRS may send you a letter (commonly called a lock-in-letter) specifying the withholding rate and allowances to use to calculate the amount of tax to withhold from wages paid to a specific employee.

Additional Information
Publication 15 (Circular E), Employer's Tax Guide
Tax Topic 753 - Form W-4 - Employee's Withholding Allowance Certificate


If you intentionally claim more withholding allowances on your W-4 than you are entitled to, you would be guilty of perjury. I think that is enough to discourage most people, even if the likelihood of being caught is low.

If you mistakenly put the wrong number or something changes in your tax situation late in the year, this is a legitimate way to avoid a penalty.

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    While not as extreme, I feel that it is easy for married, double income, no kids to accidentally underwithhold if both put "married filing jointly" on their W4s and zero exemptions.
    – ahaas
    Commented Apr 1, 2018 at 17:19
  • @ahaas the couple would at least get two exemptions, one for each of them, which would cause them to underwithhold even more than zero.
    – stannius
    Commented Apr 3, 2018 at 20:32
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    @stannius I'm kind of confused by what you mean. On the W-4, zero is the least number of exemptions possible, although perhaps some married people mistakenly enter 1, making underwithholding even worse. I think carefully reading the W-4 instructions would avoid the problem though; there is a special worksheet for dual income.
    – ahaas
    Commented Apr 4, 2018 at 0:18
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    @ahaas Right, that's what I'm saying. If they just skim the instructions, each of the spouses would put MFJ and 2 or 3 allowances. That would cause them to have even less taxes withheld (even more underwithholding) than if they put MFJ 0, per your first comment. Of course what they should have done was filled out the two earners worksheet, but, hey taxes are complicated!
    – stannius
    Commented Apr 4, 2018 at 16:23

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