If you get a large refund from the IRS each year, you’re making interest-free loans to the IRS throughout the year, by paying higher taxes than you need to pay. Then you get your own money back after you file your tax return.
Instead, you can adjust your tax withholding by revising the Form W-4 you file as an employee. Go through the calculations, as indicated on the instructions, to see how many exemptions you’re entitled to claim. If you claim the proper number of exemptions, you’ll ether wind up with a small refund or you’ll owe a little tax when you file your tax return. Meanwhile, claiming more exemptions will boost your take-home pay.
Keep in mind that the number of exemptions you’re entitled to claim on Form W-4 does not have to agree with the exemptions you claim on your tax return. If you have young children and a large mortgage, you might legitimately claim 10 or more exemptions on Form W-4, to get to the proper level of tax withholding.
