| How can I Receive a Bigger Tax Refund from the | | | | taken out of your check, thus, your weekly paycheck |
| IRS? | | | | will be smaller; however, the benefit is that at the end |
| | | | of the year you will have accumulated substantial |
| November 6, 2008 | | | | federal income tax withholdings and receive larger |
| As an income tax professional, I am often asked: | | | | income tax refunds. I call this tip the “Forced |
| “Why do my friends receive bigger income tax | | | | Savings Plan.” |
| refunds than I do?” And the answer to this | | | | If married, consider changing the W-4, Line 3 to |
| question is usually lies with IRS Form W-4. | | | | “Married, but tax at the higher single rate.” |
| Claim Zero Allowances (i.e. dependents) on W-4. | | | | If you are married, you probably marked the |
| It never seizes to amaze me that C.P.A.’s and | | | | “Married” Line on Line 3 of W-4; however, next |
| other income tax professionals do not explain to their | | | | to it is a different and separate box entitled |
| tax clients the nexus between IRS Form W-4 and the | | | | “Married, but tax at a higher single rate.” I |
| size of the refund one receives at tax time. | | | | suggest that you mark this box instead. By marking |
| Generally, those who receive the big refunds at | | | | “Married, but tax at a higher single rate,” this |
| income tax time are most likely the ones that claim | | | | instructs the IRS and your employer’s payroll |
| zero allowances (i.e., dependents) and their employer | | | | company to increase the amount withheld for federal |
| provided W-4 Form. | | | | withholding. Again, the more federal income tax |
| Ask your employer for a new IRS Form W-4, or you | | | | withholding that is deducted from your weekly |
| can download it directly from the IRS website at Form | | | | paycheck, the more income tax refund you will receive |
| W-4 determines how many allowances (i.e. | | | | at income tax time. |
| dependents) you wish to claim and how much will be | | | | Turbo-Charging your "Forced Savings Plan." |
| deducted from your weekly payroll to cover federal | | | | Another way to receive large income tax refunds Line |
| withholding. The W-4 instructions provide that you | | | | 6 of Form W-4. Line 6 instructs the IRS and your |
| count yourself as one allowance, and if married, one | | | | employer’s payroll company to take an additional |
| for your wife, and one for each child. The more | | | | specified amount from your weekly paycheck. For |
| allowances (i.e. dependents) you claim the less the IRS | | | | instance, by listing a mere $19.25 on Line 6 of W-4, you |
| and employer’s payroll service will deduct from | | | | can receive an additional $1,000.00 refund from the |
| your paycheck. On the opposite end, the fewer | | | | IRS. And at $38.46 per week you can receive an |
| allowances (i.e. dependents) that you claim, the more | | | | additional $2,000.00 refund from the IRS; and |
| the IRS and your employer’s payroll service will | | | | Naturally, no one likes a smaller paycheck; however, if |
| deduct from your paycheck. | | | | you are one of those individuals who can’t seem to |
| My advice is to skip the “Personal Allowance | | | | save money for luxuries, such as, vacations, that big |
| Worksheet,” that is, skip questions A through H and | | | | screen T.V., or a down payment on your dream car, |
| go directly to Line 5, “Total Allowances,” and | | | | changing your W-4 is a sure way to help you start |
| write zero. Yes, zero. Do not count yourself, your | | | | saving for those dreams. |
| wife, or your children. The result is that more will be | | | | |