Surprised by the size of your tax refund? Adjust your withholding.

Every year during tax filing season people complete their income tax returns and discover one of three things.

1. They owe tax,
2. They paid just the right amount during the year, or
3. They will receive a refund.

In the US tax system, employers withhold a variety of taxes, including income tax from employees' pay. Self-employed individuals, and people who have income from sources other than an employer, are supposed to make estimated tax payments throughout the year. Ideally, if the withholding is calculated correctly or if the estimated taxes are figured accurately, the amount forwarded to the government during the year will equal the amount that will be due. If the amount sent is more than the tax that will be due, then the taxpayer has made an interest free loan to the government. If the amount sent is too small, then the taxpayer may be subject to penalties.

There are many reasons that people may choose to have a larger than necessary amount withheld. For example, some people like the idea of the receiving a large refund and think of it as a forced savings plan. Another reason is that people may have an uncommon amount of deductions or credits. There may also be many reasons that withholding amounts are too small. Employees that have several jobs may find that their employers may not withhold enough. Employees may also have income from other sources. In either case, employees should either adjust their withholding or make estimated tax payments.

If your refund was too big or too small, then you should adjust your withholding or recalculate your estimated taxes. Follow the instructions that accompany the W-4. You can also use the IRS' Withholding Calculator. If you need more detailed information, it is available in Publication 919.