With all that said I know folks who have been doing this for years with no problems. I also know folks who have done this for years and have had problems. The problem comes when you evade paying the taxes. These are the folks who file exempt the entire year. But, as long as you actually file a return every year and the irs is paid what is owed to them, youre fine. No one can get into trouble for filing exempt, as long as they actually pay the taxes they owe. As long as your ducks are in a row when you file your 1040, youre fine.
The reason I will change it back in the spring is because that is the time where I can work more hours. I just made myself exempt when time went back. During the winter I will be exempt only to ease the financial burden. I used to declare 0 during the year so that when I filed my return with 2 I would get a bigger refund. Yes, I am aware that most of the refund was just money I over paid, I just looked at it as a savings acct. When I was younger I was terrible at saving money. This way I forced myself to save a little each year for a major purchase.
I also have many deductions because Im a POV employee. I supply my own tools, gas, etc.... At the end of the year Uncle sam will have been paid what is owed to him. Changing my status just makes it easier on me on how he gets it.
But just to be clear I would never file exempt or advise anyone to file exempt the entire year.
Re: Inhouse vs Contractor
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