tax tips | April 26, 2019 | By Susannah McQuitty
If you do it the healthy way, growing your tax refund takes time and attention—but probably not as much as you think. Since you’ve finished your taxes for the year and have a good idea of where you sit financially, there’s no better time to form an action plan to save money and boost your refund next year.
Where do refunds come from?
Time for some Tax Knowledge 101. For anyone who is still mystified by tax refunds and why they may fluctuate from year to year, let’s break out the basics.
Every American citizen is taxed on the money they make. To make regular tax payments throughout the year, W-2 wage earners have a portion of their income withheld by their employer and sent to the IRS each pay period. Those withholdings are added up and compared to your tax bill: If you didn’t pay enough throughout the year, you have to send the remaining money to the IRS to cover the balance; if you paid too much, you get a tax refund.
Think of your refund like the change you get at the grocery store when you use a $20 bill to buy a gallon of milk and a loaf of bread. The government isn’t giving you its money (unless you qualify for a refundable credit, but that’s a topic for another day). You’re just getting back the change for what you overpaid.
How do I boost my refund?
Getting a bigger refund is simple: Pay more money to the IRS throughout the year. Sounds a bit odd, though, doesn’t it? It’s important to realize the balance between the money in your pocket per paycheck and the number on your tax refund check.
For some people, a bigger refund isn’t worth having less money throughout the year, and that’s totally fine. After all, that money can be working for you in the form of an interest-bearing savings account, rather than for the government. For others, stashing away a little per paycheck to receive at the end of the year is a great plan, and that’s fine too.
Whichever you choose, you can control just how much you pay or don’t pay during the year by adjusting your withholding amount per paycheck.
How do I change my withholding?
Employees change their withholding amount by filling out a Form W-4 and turning it in to their employer. If you want a bigger refund, you can list an additional amount to be withheld from your paycheck on Line 6. If you want a bigger paycheck, simply adjust your allowances accordingly.
Adjusting your refund up or down is a little different if you’re a freelancer—simply pay more per quarterly estimated payment for a bigger refund. If you want more money in your pocket throughout the year, pay only what you estimate owing.
File with 1040.com to get all your tax breaks
The last and easiest thing you can do to grow your refund is to file with 1040.com next year, because we’ve developed a process to help you find all the tax breaks you qualify to get. You don’t have to work harder—we do that for you—and your tax savings get boosted (with any applicable tax breaks like those refundable credits we mentioned).