I've had a few bits of info bouncing around in my head for a few years that finally collided and formed an idea.
I'm a tax noob so please correct me where I'm wrong.
Info:
- Once upon a time I was filling out a W4 and I was uncertain how many dependents to claim because my wife and stepdaughter were not in the country. I asked HRLady and she said something to the effect of: "I'm not qualified to advise you, but the way it works is: Your W4 doesn't have to be accurate, but your income tax filing at the end of the year does. If you're worried about having to pay at the end of the year, then file as a single person and you will be taxed at a higher rate. At the end of the year, if your tax professional deems that you can claim them, then claim them, and you will get a sizable tax refund."
- Once upon a time a colleague told me something to the effect of: "The income tax that you pay throughout the year is effectively a loan that you are forced to float to the US government, for which you are paid no interest, and for which you don't even get back most of the principal."
Now, if HRLady is correct, then colleague is only partly correct; I'm not FORCED to float that loan to the government. I theorize that I could claim 99 dependents (or by some other method) to avoid paying any income tax during the year. Figuring the IRS takes roughly 30% of my money (Currently I claim less dependents than actual, to ensure I get a refund), instead of letting it languish in .gov coffers, I could put 30% of each of my (untaxed) paychecks into an investment account (IRA/stocks/bonds/etc.) so that it is performing for me throughout the year. Then at the end of the year I could calculate what I owe and cut the government a check from that account.
Is that reasonable? Possible? Are people doing it already? Why/Why not?