No More Interest-Free Loans to the Feds

I’ve heard it said the goal at tax return time is to owe the government a small amount of money. While this advice stung at first, seeing as I was receiving large refunds each year, I eventually came around. Why should I pay the government extra money throughout the year and then get excited when it’s given back later without interest?

In order to try and obtain this ideal, I altered my tax forms on file at my employer to claim 6 dependents – even though I only had two (my wife and me). I began to worry I may have gone too far, however, when a job change put some extra income in my pocket – a signing bonus and a 401k rolled into a Roth IRA. I was worried I’d end up owing the government a couple thousand, not a couple hundred.

After filling out my 2007 taxes online, however, I found myself still in the black (i.e., I’m going to get a small refund). If 6 wasn’t enough even with the extra income, how many would it have taken normally? 10? 25? Actually, I wonder what would have happened if I had claimed 100 dependents. Could I effectively shut off all tax withholdings?

And if I could, wouldn’t that be the most financially advisable thing to do? Why not keep and earn interest on all of my money? Sure, I’d have to cut a large check eventually, but the interest earned on the funds would be mine to keep (well, not including the taxes I’d have to pay on them – particularly if there’s a Democrat in office in 2009 – but you see what I mean).