Experts warn that a significant refund could reflect overpayments in taxes during the year. According to financial analysis, the ideal balance involves adjusting withholdings to get closer to a net obligation close to zero. “The best thing is to avoid both surprise debts and large returns,” say specialists, highlighting that paying more is equivalent to giving up resources without obtaining benefits.
Monitoring tax withholding in each salary payment is key to minimizing imbalances at the end of the fiscal year. Analysts explain that, although some taxpayers see refunds as “forced savings,” this practice involves lending money to the government without return. Additionally, adjusting withholdings for changes in income or deductions prevents penalties for underpayment.
Deadlines and amounts for tax season
Filing for 2024 will close on April 15, although it is possible to request an extension until October 15 using Form 4868. The IRS processes refunds in 21 days for electronic returns, but errors in data or mailings can delay payments for up to a month. As of January 31, the average refund was $1,928.
Refund amounts have increased 32% compared to 2023, when the average was $1,395. For direct deposits, the figure reached $2,069. The IRS recommends using its “Where’s My Refund?” tool, which updates the processing status within 24 hours for returns filed digitally. Instead, those who submit physical forms must wait at least four weeks for information.
The key method to accurately calculate your tax refund this year
The secret to determining the exact amount of the refund lies in a combination of official tools, proactive adjustments and constant review of fiscal variables. Although not explicitly mentioned in previous analyses, experts agree that the IRS Withholding Estimator—available on their website—is the central tool for accurately projecting withholdings and annual obligations.
This digital instrument, designed by the IRS, allows you to enter data such as income, marital status, dependents, and tax credits. By processing the information, you generate an estimate of how much will be owed or received at the end of the year. Updating this data every quarter—especially after salary changes or life events—ensures more accurate calculations and avoids surprises.
Form W-4, which determines how much is withheld from each check, can be changed at any time during the year. If the estimator indicates overpayments or underpayments, adjusting the allocations on lines 3 (credits) and 4 (backup withholdings) balances the flow. For example, increase withholdings if you have additional non-taxable income, such as rent or investments.
Factors such as employment bonuses, freelance income, changes in deductions (mortgages, donations) or new dependents significantly alter the final result. Including these elements in the estimator—and updating them as they occur—is essential. Those who omit details such as income from digital platforms (Ex: Uber, Etsy) often underestimate their debt and receive smaller refunds or unexpected bills.
For taxpayers with income not subject to withholding—such as contractors—the IRS requires estimated quarterly payments (Form 1040-ES). Calculating these payments requires projecting annual earnings and applying current rates. Underestimating these amounts results in accrued interest, while overestimating involves lending money to the government without a return, similar to excessive payroll withholdings.
How should you invest your tax refund?
Advisors suggest allocating the funds to reduce high-interest debts, strengthen emergency savings or increase contributions to retirement plans. “If you opt for high withholdings, it is crucial to commit to using that capital productively,” they emphasize. The IRS also emphasizes the need to avoid errors on forms to speed up the return process.
Increasing tax withholding to ensure a high refund is not considered an optimal financial strategy. Experts point out that this limits liquidity during the year, affecting the ability to cover immediate expenses. However, for those who have difficulty saving, it could work as a disciplined method, as long as the funds are used with a defined purpose.
The consequences of missing tax season deadlines
Failure to file the return before April 15 carries fines, unless an extension is requested. Even with an extension, taxes owed must be paid by the original date to avoid late fees. The IRS has processed returns for eight million taxpayers, although it warns of delays in postal cases due to high demand.
Effective tax planning requires continuous adjustments to withholdings, considering changes in income, deductions, or credits. Experts insist that approaching a zero net obligation maximizes financial control. For complex situations, consulting a professional reduces risks of errors and penalties for inaccurate calculations.