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How to Tweak Your W-4 to Get a Bigger Tax Refund (and Why You Probably Shouldn't)

Increasing your withholding amount on your IRS W-4 form will give you more money back each tax season, but you really want the "Goldilocks" amount of "just right."

A magnifying glass and pen are placed on an IRS W-4 form
Your W-4 form is what determines the amount of money that your employer withholds for taxes.
Maks_Lab/Getty Images

It's always great to get a big check, like when a large tax refund arrives. In 2022, the average American with a tax refund received more than $3,000 back from the IRS. 

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It can be simple to make your tax refund even bigger each year, and it only takes a few minutes, once you have the paperwork in hand. The IRS even bakes the process into one simple step on its tax forms.

However, a bigger tax refund may not be as great as it seems. After all, it is your money that the government is holding onto -- and you may have ideas how you'd use it. Learn how to adjust your IRS W-4 tax form to get a bigger tax refund, and all of the factors you should consider before doing so. For more, learn about new state child tax creditswhether your student loan debt forgiveness is taxable or not, and the best tax software for 2022.

What is a W-4 form?

A W-4 form is a federal tax form from the IRS that lets your employer know how much money should be withheld from your paycheck for federal taxes. The IRS website says that taxpayers should "consider completing a new Form W-4 each year and when your personal or financial situation changes."

The W-4 form was revised for the 2020 tax season to "reduce the form's complexity and increase the transparency and accuracy of the withholding system." Withholding allowances -- or exemptions that reduced the amount withheld -- were eliminated and replaced by calculations of additional untaxed income and expected tax deductions.

How do I change my W-4 to get a bigger tax refund?

If you want to get more money back in your tax refund each year, you can designate that a larger amount of your paycheck is withheld. It's simple -- just enter the extra amount you want withheld from each paycheck on line 4(c) of your W-4 form. The line is marked "Extra withholding."

A picture of a W-4 form showing where to add extra withholding

To request more money be withheld from your paycheck, enter the amount into line 4(c) of the W-4 form.

IRS/Screenshot by Peter Butler/CNET

Likewise, if you find yourself owing taxes to the IRS each year, adding the right amount of extra withholding via line 4(c) of your W-4 can reduce your tax burden to zero each year. Just divide the amount you usually pay in federal taxes by the number of paychecks you receive in a year to find out how much extra should be withheld each pay period.

While lending the IRS your money for 12 months or more at no interest might seem nuts to the financially disciplined, it's an undeniably bulletproof method of saving money. You might not be earning interest, but you're not spending it.

Why shouldn't I increase my withholding to get a bigger tax refund?

Quite simply, it's your money, and the IRS is holding onto it for up to a year with no interest. You could be spending that money, investing it to keep up with inflation or doing whatever the heck it is you want to do with that money… because it's yours!

While it's nice to get a big tax refund check in the spring, inflation is still sitting at 8.5% over the past year. That means that your $100 from September 2021 will get you about $92 worth of stuff these days. If you put that money into a Series I savings bond instead of letting the IRS hold it, you could get 9.62% back on your money right now, eliminating loss from inflation.

How do I adjust my W-4 to get more money back in my paycheck?

As mentioned, the IRS eliminated withholding allowances in 2020, so withholding less money is no longer as simple as increasing the number of allowances on your W-4 form. 

Also note that the US is a "pay as you go" tax system. You're not allowed to eliminate withholding completely and pay your tax burden each April -- there's a penalty for underpayment of taxes.

However, if you're getting a big tax refund every year and you'd rather have that money back sooner in your regular paycheck, you have some options, the biggest being deductions. 

Take a look at your existing W-4 and your deductions from your last federal tax return. Increase the deductions amount on your W-4 form to meet the amount on your income tax returns. Make sure to look at student loan interest and IRA contributions, which are included in addition to your deductions estimation.

If you had no tax liability for the previous year, it's possible you might not have to pay any taxes at all in the current year. To declare yourself exempt from withholding, according to the IRS, you "must have had no tax liability for the previous year and must expect to have no tax liability for the current year."

If both conditions are true, per the IRS, write "Exempt" on Form W-4 in the space below Step 4(c). Complete steps 1(a), 1(b) and 5, then stop.

Also important, according to the IRS, the "Form W-4 claiming exemption from withholding is valid for only the calendar year in which it's furnished to the employer. To continue to be exempt from withholding in the next year, an employee must give you a new Form W-4 claiming exempt status by February 15 of that year."

When can I adjust my W-4?

You can adjust your W-4 form any time that you would like. As mentioned, the IRS recommends checking your W-4 form once a year, but you should also update it upon certain events:

  • Birth of a child, or new dependent
  • Marriage or divorce
  • New job for you or your spouse
  • Purchase of a house or other major tax change

Your employer must implement your new W-4 info by the start of the first payroll period that ends on or after the 30th day after you submit an updated W-4.

Note: Talk to a tax expert to discuss your personal tax situation before adjusting your W-4 form. IRS local offices provide expert advice at various times via appointment.