Question

Why does the federal government collect income taxes in installments rather than waiting until the end of the year? answers?

Answer 1

It is more convenient for the government and taxpayers to collect in installments.

Answer 2

The federal government collects income taxes in installments rather than waiting until the end of the year for a variety of reasons. The primary reason is for cash flow purposes. The government's cash expenditures are ongoing throughout the course of the year so in order to manage cash flow to allow for payment of the expenses they need periodic inflows as well. This is the practical purpose for the installments. Failure to have periodic cash flows to match periodic expenditures would also result in the need for heavier short term borrowing which would further increase expenditures in the form of increased interest incurred. Cost savings is therefore a second reason.