This is a really important question that a lot of people struggle with. I've seen so many folks get into trouble by claiming exempt when they shouldn't. The key thing to understand is that claiming exempt doesn't make you exempt from taxes - it just stops the withholding. You're still responsible for paying what you owe. The IRS generally won't come after you immediately, but you could face underpayment penalties if you owe more than $1,000 and haven't paid at least 90% of your current year tax liability (or 100% of last year's). The penalty is calculated monthly on the unpaid amount. For your situation making $58K, claiming exempt for just November/December probably won't trigger major penalties since you're withholding most of the year. But your coworkers doing it all year are playing with fire - they could end up with a massive tax bill plus penalties like some others have mentioned here. If you need extra cash for holidays, consider adjusting your withholding instead of claiming exempt entirely. It's a safer middle ground that still gives you more take-home pay without the risk.

I appreciate everyone sharing their experiences here - it's really eye-opening to see the range of outcomes people have had with W-4 exempt claims. What strikes me most is how the consequences seem to scale with the duration and amount. Claiming exempt for a month or two like the original poster might result in manageable penalties, but doing it all year (like some mentioned) can create serious financial stress. One thing I'd add is that if you're considering claiming exempt or adjusting withholding, it's worth calculating your actual tax liability first. The IRS withholding calculator on their website is free and can help you figure out if you're having too much or too little withheld without having to guess. Also, for those who've gotten into trouble with this - don't panic. The IRS offers payment plans and penalty relief options in certain situations. If you're proactive about fixing the issue and communicating with them, they're often more willing to work with you than if you just ignore the problem. Thanks for the honest discussion everyone. These real-world examples are way more helpful than just reading the technical rules.

Pro tip: If you make under $73,000 a year (for 2024 taxes), you can use IRS Free File to access truly free tax filing options, including for claiming the Retirement Savings Contributions Credit for your 401k. Go directly through the IRS website though, not through TurboTax's site.

This is exactly why I switched to FreeTaxUSA three years ago and never looked back! TurboTax's bait-and-switch tactics with retirement credits are infuriating. For anyone considering alternatives, I've found FreeTaxUSA handles the Saver's Credit seamlessly in their free federal filing - no surprise upgrades. They only charge $14.99 for state filing, which is way better than TurboTax's $50+ state fees. The interface isn't as flashy as TurboTax but it gets the job done without the predatory pricing. Also want to echo what others said about the IRS Free File program - if you qualify income-wise, that's your best bet for completely free filing with all the credits you're entitled to. Don't let these big tax companies trick you into paying for basic tax situations!

Can someone explain what line on Schedule A all these different property tax payments go on? Is it all combined into one number or broken out separately?

Just to add another perspective here - I went through this same situation when I bought my house in 2023. The key thing to remember is that you're entitled to deduct ALL the property taxes and mortgage interest you actually paid during the tax year, regardless of whether they show up on your 1098 or not. Your closing statement (HUD-1 or Closing Disclosure) is your proof for those additional amounts. Make sure you're looking at the right sections - property taxes are usually in the 1000 series line items, and any prepaid interest or points would be in the 800 series. The $3,200 and $1,850 you mentioned sound very reasonable for closing costs. One thing I learned the hard way - if you're taking the standard deduction, none of this matters since you won't be itemizing anyway. But if your total itemized deductions (including these property taxes and mortgage interest) exceed the standard deduction, then every dollar counts!

The debate about flat taxes is fascinating, but I think we need to consider what "fairness" actually means in taxation. From my perspective as someone who's worked in both high and low-paying jobs, the current progressive system recognizes that $1,000 means very different things to someone making $30,000 versus someone making $300,000. A true flat tax with zero exemptions would essentially be a regressive system in practice. When you're spending 80% of your income on basic necessities like rent, food, and healthcare, taxing that remaining 20% at the same rate as someone who spends maybe 30% on necessities feels fundamentally unfair. I keep thinking about this: if we eliminated the mortgage interest deduction, charitable deduction, and other complex provisions that mainly benefit higher earners, but kept basic protections like the standard deduction and earned income credit, wouldn't that achieve most of the simplification benefits without hurting working families? Sometimes I wonder if the "flat tax" conversation is really about simplification or if it's actually about shifting the tax burden downward.

As someone who's been following tax policy discussions for years, I think this conversation really highlights why nuanced policy analysis matters more than catchy slogans like "flat tax simplicity." The reality is that our current system, while complex, has evolved to address real-world inequities. When people say the bottom 50% only contribute 3% of revenue, they're missing the point - that's actually evidence the system is working as intended to protect those with the least ability to pay. I've noticed that most serious flat tax proposals end up including some form of exemption or "prebate" system precisely because pure flat taxation would be devastating to working families. At that point, you're not really implementing a flat tax anymore - you're just redesigning the progressive system with fewer brackets. What strikes me about this thread is how valuable it's been to see people actually run their numbers rather than just debating in the abstract. Whether through AI tools, IRS consultations, or international comparisons, the concrete examples show that tax policy isn't just about simplicity - it's about balancing revenue needs with economic fairness and social outcomes. Maybe instead of pursuing a flat tax, we should focus on targeted simplification: eliminate complex deductions that primarily benefit high earners while preserving the credits and exemptions that help working families. That seems like a more practical path to both simplicity and fairness.

This is a great question and totally understandable confusion! As others have mentioned, the difference between Box 1 and Box 5 is usually due to pre-tax deductions. Since you mentioned this is the first year you've seen this difference, it sounds like you may have started or increased contributions to things like a 401(k), health insurance, or flexible spending account. To verify everything is correct, I'd recommend checking your final paystub from December 2024. Look for any "pre-tax" deductions and add them up - that total should roughly match the $5,800 difference between your boxes. Common culprits are: - Traditional 401(k) contributions (very common if you got a raise and decided to save more) - Health/dental/vision insurance premiums - Flexible Spending Account (FSA) or Health Savings Account (HSA) contributions - Dependent care assistance If the math doesn't add up or you can't find deductions that explain the difference, then it would be worth contacting HR. But in most cases, this difference is completely normal and actually beneficial since those pre-tax deductions reduce your federal income tax liability!

I just wanted to add that this exact scenario happened to me two years ago when I started contributing to an HSA for the first time. The $3,000 annual HSA contribution I made showed up as the difference between Box 1 and Box 5, and I panicked thinking my employer made an error. What helped me understand it was realizing that HSA contributions are "triple tax advantaged" - they reduce your federal income tax (hence lower Box 1), but you still pay Medicare tax on that income (hence it stays in Box 5). Same principle applies to traditional 401(k) contributions and most other pre-tax benefits. If you started any new benefits this year or increased existing contributions, that's almost certainly what you're seeing. The good news is this difference typically means you're saving money on your federal taxes! Just double-check your final paystub to make sure the pre-tax deductions add up to roughly that $5,800 difference.