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Tax Planning

How to Get Next Year's Tax Refund Now

It all starts with filling out a new W-4 form with your employer.

Isn’t it ironic that the dreaded task of filing a tax return ends with a celebration for most taxpayers, since three out of four of us actually get refunds each year rather than having to write the IRS a check.

See Also: How to Fill Out a W-4 Form

More than anything else, though, refunds simply tell us that we let Uncle Sam dip too deep into our paychecks during the year. The sweet government checks or direct deposits simply give to about 110 million of us what never should have been taken away.

There’s an easy way to stop this silly ritual. If you habitually get a refund, there’s a way to start getting next year’s refund in installments starting next pay day.

All you need to do is give your employer a new W-4 form. The number of “allowances” you claim on that little form controls how much federal income tax will be withheld from each paycheck. Claim more allowances, get more pay when you earn it. It’s that’s simple.

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If you’re in the 25% tax bracket, for example, each extra allowance you claim will cut withholding – and increase take-home pay – by about $85 a month. If you got an average size refund of almost $3,000, you could qualify for an extra three allowances and boost your take-home pay by $250 each month.

The instructions that come with the W-4 will help you pinpoint the number of allowances you deserve, and IRS Publication 505 offers more help.

But there’s an easy way to get pointed in the right direction. Kiplinger has created an online calculator that will do the work for you, assuming your financial life hasn’t changed significantly since last year. Go to www.kiplinger.com and search tax withholding calculator.

Once you give your employer a revised W-4 claiming more allowances, you’ll enjoy the almost instant gratification of a fatter paycheck. We call it a do-it-yourself tax cut.