why would an individual choose to underwithhold 
some individuals deliberately choose to have their taxes underwithheld for example a taxpaper may take some of the funds that would have been withheld and invest that same amount if the individual turns a profit they come out ahead after paying their income taxes however it is important to remember that excessive underwithholding can result in a penalty also a person who reduces their withholdings by purposefully claiming more allowances than they are entitled to on their w 4 form could theoretically be charged with supplying false or fraudulent information 3 underwithholding s opposite overwithholding and its benefitsa taxpayer might also choose to do the opposite of underwithholding and instead overwithhold an individual can accomplish this by withholding more than they will most likely owe in income tax if an individual overwithholds they will then receive a tax refund after they have filed their return 3 but if an individual overpays their taxes they in essence give the internal revenue service an interest free loan 