R
eceiving a big ol’ check from Uncle Sam can be viewed as a bad thing. Why? Because it represents an interestfree loan you’ve made to the U.S. government. Instead of withholding all of that cash from your paycheck, you could have been putting it to work by building your emergency fund, paying off debt and investing in your retirement. To avoid excessive withholding and get more money back throughout the year, first discuss your W-4 form with a humanresources representative and/or a certified tax professional. “The number of personal allowances you have depends on your marriage status and dependents,” Pfaehler says. “The fewer the number of allowances, the greater the withholding rate. If you consistently have a huge refund, you might have too few allowances.” However, you don’t want to cut the withholdings too close. In fact, financial/ investment expert Jim Morrison feels that all the fretting over the “giving the government an interest-free loan” thing is overstated. “So what if you’re giving the IRS that loan?” asks Morrison, who founded Morrison Financial Group. “At today’s interest rates on savings accounts with a $3,000 tax refund, you’re giving up literally just a couple of dollars a year. However, the tax penalties for under-withholding are severe. They also can result in the requirement to file quarterly tax estimates for years to come. All of which means that obsessing about withholding too much simply isn’t worth the potential hassle.”
