Ksaleh, I agree with Nords, and that is what my wife and I still do; hate getting a refund, even in the present interest rate environment. Just be careful to hit the safeharbors (100% of prior years tax obligation or 90% of present years for most people with close to typical pay/income) We typically end up jiggering our withholding amounts several times each year so as to get as close as possible to the minimum allowable amount paid.
Also, note that if there are 14 exemptions or more claimed, a report must be made to the IRS by employer. Some states/cities are even pickier. NYC requires its employees to file a "Withholding Certificate Affirmation" if claiming more than 10 federal allowances.
http://www.nyc.gov/html/opa/html/taxes/withholding.shtml#unsigned Still, as long as you pay the amount for which you are obligated via the lump sum addon each paycheck, the reporting requirement shouldn't harm you.
On a bit of a tangent, although he generally knows a lot more than me in the retirement realm, I think Nords might be making a little bit of an overstatement on one point:
[SNIP] . . .
The caveat is that you still have to pay enough tax each quarter (either via withholding or sending in estimated payments) to meet the minimum requirements. The next estimated tax payment (for tax year 2013) is due around 15 April. Your state and your local taxes may have similar requirements.
[emphasis mine, and SNIP] ***
My understanding has always been that as long as you can meet the safeharbor amounts via paycheck withholding, the quarterly requirements are not applicable. (We've had a couple of $100 net income months in past Decembers, in fact, to fix underwithholding on bonus payouts.) I don't see it in Pub 505, but found one CFP/CPA agreeing with me on his site:
"You can compensate for earlier underpayments during the current year by adjusting your withholdings for the last few months of the year. The IRS considers withheld payroll taxes as being paid equally throughout the year, in spite of when actually withheld." http://www.karlblovet.com/tax-penalties.htm Probably getting pretty far into the trivia weeds, as most folks would rather not have $100 pay check months, but . . . :-)
