Getting a tax refund might feel like a windfall you never get from the Lottery. But think of it this way: It's your money that's been sitting in the government's coffers for months. You've given the government an interest-free loan. And, as I've written before, overwithholding might hurt low-income taxpayers in other ways.
Put that money to use in your own savings account by adjusting your W-4 withholding. The Internal Revenue Service offers an online Withholding Calculator to help you estimate them. You'll need your pay stub, your 2011 tax return and 5-10 minutes of spare time.
It's Only Money followed the IRS Withholding Calculator's recommendations two years ago and owed little to the feds and got a small refund from the state.
It did not readjust its withholding in 2011, however, so it owed several hundred dollars to both the state and the feds.
You can even adjust your state and federal withholdings separately, in case you find you often owe the state and not the feds.
A few readers have questioned the accuracy of withholding calculator. It's Only Money believes it's accurate for most taxpayers with fairly straightforward taxes. Best to check it once each year, though.
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