Taxpayers can adjust the amount of money withheld from a paycheck for taxes by changing the number of withholding allowances on the W-4 form filed with their employer. This form calculates how much an employer should withhold from a paycheck for federal income taxes. To reduce tax withholding, increase the number of allowances. To increase tax withholding, decrease the number of allowances and/or add a regular additional payment.
Some people overpay taxes as a way to create a sort of savings fund which will be paid to them as a tax refund. This money earns no interest while it is waiting to be refunded, so a taxpayer may wish to increase savings and put that money in an interest earning account or investment instead of overpaying taxes.
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