A refund means you overpaid taxes during the year

A tax refund happens because your employer withheld more money from your paychecks than you actually owed in taxes. The IRS held that extra money all year, then gave it back to you after you filed. If you want to stop getting a refund, you need to change how much your employer takes out of each paycheck — this is called withholding.

The goal is to have almost exactly the right amount withheld so that when you file your taxes, you owe nothing and get nothing back. You will still file your tax return; you just won't have a refund waiting.

The main tool for this is Form W-4, which you give to your employer. It tells your employer's payroll department how much federal income tax to remove from your pay. Changing it is free and takes a few minutes.

Key Takeaways

  • You control withholding by filling out Form W-4 with your employer, which you can change at any time during the year.
  • The IRS has a withholding calculator on its website that estimates how much should be withheld based on your specific situation.
  • If you got a large refund last year, you likely need to claim more allowances or adjust your withholding amount on the form.
  • Changing your W-4 takes effect on your next paycheck, so you can adjust multiple times if needed.

Use the IRS withholding calculator to find your target

The IRS provides a free tool called the Tax Withholding Estimator on irs.gov. You enter information about your income, filing status, dependents, and other income sources, and it tells you what your withholding should be.

To use it, you will need your most recent pay stub (which shows your gross pay and what has been withheld so far this year), your last tax return, and information about any other jobs or income. The calculator then recommends a withholding amount or number of allowances to enter on your W-4.

This is more accurate than guessing, because it accounts for your actual situation — whether you are married, have kids, work two jobs, or have investment income. The calculator is updated each year and is free to use.

Adjust your W-4 with your employer

Once you know what withholding you need, you fill out a new Form W-4 and give it to your employer's payroll or human resources department. You do not file it with the IRS; your employer keeps it on file.

The form has two main sections that affect your withholding. The first is Step 3, where you claim dependents (children and other relatives you support). Each dependent you claim reduces your withholding. The second is Step 4, where you can enter a dollar amount to have withheld from each paycheck — this is useful if you have side income or investment income that is not being withheld.

If you got a large refund last year, you likely need to reduce your withholding. This usually means claiming more dependents in Step 3, or entering a negative amount in Step 4 to reduce what comes out of your check. Your payroll department can walk you through the form if you are unsure.

What to expect after you submit a new W-4

Your new withholding takes effect on your next paycheck after payroll processes the form. You should see less money withheld for federal income tax, which means your take-home pay goes up.

If you made the change partway through the year, your paychecks will be larger for the rest of the year. When you file your taxes the following spring, you should owe very little or get a very small refund instead of a large one.

Keep in mind that withholding is not exact. You might still get a small refund or owe a small amount, because your income or tax situation may have changed during the year. The goal is to get as close as possible to zero.

Reasons you might want to keep some withholding

Some people prefer to get a refund, even though it means overpaying. If you find it hard to save money, a refund can feel like forced savings — you get a lump sum once a year instead of having extra money in each paycheck that you might spend.

Others keep extra withholding because their income is unpredictable. If you work freelance or have variable hours, you might withhold more than you need to from a W-2 job to cover taxes on the side income. In that case, a refund is actually a safety net.

There is no penalty for getting a refund. The only downside is that the IRS held your money interest-free for a year. If you want that money in your pocket sooner, adjusting your withholding is the way to do it.

Adjust multiple times if your situation changes

You can submit a new W-4 whenever your situation changes — if you get married, have a child, take a second job, or your income drops. There is no limit to how many times you can change it.

If you adjusted your withholding and then got a refund anyway, you can file another W-4 mid-year to reduce it further. The changes take effect on your next paycheck, so you can fine-tune throughout the year.

Some people adjust their W-4 in January based on the previous year's refund, then adjust again in the fall if their income changed. This is normal and encouraged by the IRS.

Frequently Asked Questions

Can I change my W-4 more than once a year?

Yes. You can submit a new W-4 whenever you want, and there is no limit. Each new form replaces the old one, and the change takes effect on your next paycheck. Many people adjust once or twice a year if their income or family situation changes.

What if I have two jobs — does that affect my withholding?

Yes. When you have multiple jobs, each employer withholds based only on that job's income, which can result in under-withholding. The Tax Withholding Estimator accounts for this. You can also use Form W-4, Step 2(c) to tell one employer about your other job, or enter a dollar amount in Step 4 to have extra withheld.

Will I get in trouble if I adjust my withholding too much and owe taxes?

No. You will not face penalties as long as you withheld at least 90 percent of your current year's tax or 100 percent of your prior year's tax (whichever is smaller). If you owe a small amount when you file, you straightforward pay it then. Owing money is not a penalty.

How do I know if my W-4 change worked?

Check your pay stub a few weeks after you submit the new form to see if the federal income tax withholding changed. When you file your taxes the following year, look at your refund amount. If it is much smaller than before, your adjustment worked. If you still got a large refund, you can adjust again.