I hope by now you get it: tax time is great because you get a nice fat refund, right? Your IRS tax refund is what makes that time of year bearable. Winter might be hanging on so the weather isn’t great, and there aren’t really any big vacation times coming up, nothing to look forward to except working, paying the bills, and… your IRS tax refund! Yippee!
Don’t Judge a Refund By its Size
The bigger the better when it comes to your tax refund, right? Wrong. I’m just going to flat out say this: if your IRS tax refund is too big, then you are kidding yourself if you’re happy about that.
I”m rich! I got a $3000 IRS tax refund!
Nope, that person isn’t as rich as he thinks he is. In fact, if he or she really understood how an IRS refund works, he’d correct his reaction to having a huge refund. It would go something more like this:
I’m stupid! I got a $3000 IRS tax refund!
Why? Because it’s your money that makes up your tax refund. It was yours all along and if you had filled out your W4 correctly you could have had it all along. Why? What? Well take a look at the name: it’s called refund, not a gift.
When your employer takes money from your paychecks for withholding (this is your share of paying the social security and medicare taxes), it’s based on the information you supplied when you filled out the IRS W4 form. This asks you how many allowances you claim…do you have children, etc. You can also request that extra withholding be taken out if you don’t want to see a high tax bill next April when you file your federal tax return.
If your IRS tax refund is huge, then too much of your salary is being shipped off to the IRS each pay period. You’re just going to get it back, so why give it in the first place? Couldn’t you use your money as it gets earned, rather than having the IRS hold onto it, without paying interest all year long?
Adjust the Size of Your IRS Tax Refund
If you’re having too much taken out, then you should adjust your withholding by submitting a fresh W4 form. Here’s a link to the IRS website page that has the PDF version of the form. You can also ask your employer for a new one if you prefer.