I’m 32 and recently moved to California for work from a state with no income tax. My income, including moving expenses, bonuses, and cost of living adjustments, will be over $300K, and I’m looking at paying $120K in taxes. I was wondering if there’s a way to invest the money I’d pay in taxes during the year and then pay everything in April. Is this allowed? I’ve read a few things about quarterly payments versus withholding, but I’m still unsure. Can you just withhold nothing and pay it all at the end?
Taxes are due as you earn the income, not just in April. If you underpay during the year, you’ll face penalties, even if you pay the full amount by April. Here’s more info: Topic no. 306, Penalty for underpayment of estimated tax | Internal Revenue Service
No, you can’t skip withholding without consequences. If you underpay, the IRS can even make your employer withhold the maximum allowed by law until it’s fixed.
Nope, you can’t just hold off on taxes until the end of the year. Underpayment penalties would cost more than any potential gains you might make by investing the money. The best options are to max out your 401k and HSA (if you have one) and look into itemizing deductions if they’re more than the standard deduction.
If you’re paying $120K in taxes, you should hire a tax professional to look into this for you. They’ll be able to help based on your full situation.
The government wants their tax money throughout the year, not just in April. If you try to withhold nothing, you’ll face penalties and interest from both the IRS and the state. It’s usually not worth it, as the penalties are higher than what you’d gain from investing. This article explains it well: Tax Underpayment Penalty: What It Is, Examples, and How to Avoid One
The IRS expects payments in the same quarter you earn the income. Waiting until April will result in penalties.
LOL, this won’t end well for you.
You’d get hit with penalties for underpaying during the year.
You need to either withhold taxes or make estimated payments in the same quarter you earn the income, or you’ll face penalties.
This sounds like taking a high-interest loan to make investments. What investments could possibly make this a good idea?
There might be an option if you qualify for safe harbor rules based on your previous year’s taxes. You should talk to a tax professional in California to see if this applies.
If you don’t withhold taxes or pay estimated taxes, you’ll face underpayment penalties. Bonuses and moving expenses could affect your withholding too. A good approach is to aim to owe a small amount at the end of the year without triggering penalties.
California might let you pay taxes in April for the first year, but after that, there will be penalties for not making estimated payments.
Not without getting penalized.
If you call yourself a sovereign citizen, you can pretend to do anything you want. Good luck with that.
You can choose to do this, but you’ll face penalties and interest. At the federal level, you’d need to pay at least 110% of last year’s taxes to avoid this. California won’t be any friendlier.
Move back to your old state and stop paying California taxes.