You might think that getting a big tax refund is a good thing, but that is not actually the case. The money in your tax refund does not come from the benevolence of the government – it is your money and has been all along.
Lending to the Government at 0%
A large tax refund actually means that you have been loaning your hard-earned money to the government all year long – and earning no interest for your generosity. Wouldn’t it be better to get that tax refund now – when you can really use it?
You probably filled out a W-4 form on your first day of work, but that form was just one of many you completed that day. Your tax situation may have been quite different then, and that could mean your withholding rate is now too high. If you were single when you started your job and filled out your W-4, your employer used that information to set your withholding rate.
Review Your W-4
Now that you are married with children (and the tax breaks they provide), the amount withheld from each paycheck is too high. That means a big refund when you fill out your tax form, but it also means less money in every paycheck. Couldn’t you use that extra money now to pay for the kids’ clothes or put braces on their teeth?
If you cannot remember how many exemptions you claimed when you filled out your W-4 form, you can check with the human resources office at the company you work for. If the number of exemptions has increased since you first started working, you can change the form and keep more money in your wallet.
You may get a smaller refund going forward, but you will have more money now – when you need it most.