Large tax refunds may signal IRS overpayment

Many people receive large tax refunds, but this may indicate they are overpaying the IRS. If your refund exceeds $1,000, consider adjusting your paycheck withholdings to receive more money throughout the year. Tax overpayment often occurs when too much is withheld from paychecks. Updating your W-4 form can help, especially after significant life changes. Tools like the IRS Tax Withholding Estimator can assist in determining the right amount to withhold. You can still receive a tax refund without overpaying by qualifying for refundable credits, such as the Earned Income Tax Credit. Deciding between a larger paycheck or a lump sum refund is personal, and understanding the implications is important.