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Articles > Tax Refund

How your tax withholdings can actually be a loan you cannot afford when receiving your income tax refund

Over Withholding - A Loan You Cannot Afford
by Glen Becker

Suppose your uncle made you this offer: “Every time you get a paycheck, send me $50 or $100. Then, next spring, you can spend hours filling out long, complicated paperwork that proves to me that I owe you money. Mail them in, and after a few weeks, I will give you back the money that you loaned me, but not a penny more. If you keep sending me money after January 1st, you won’t get any of that back until the year after.”

No way! Why would you want to do that? Why loan money to your uncle interest-free, while you are paying 18% to 24% plus interest to banks for your credit cards?

Yet most Americans do exactly that. They loan money each payday to Uncle Sam, and even though he does not really want the loan, they insist on lending it anyway. Most Americans live under the illusion that a big tax refund is a good thing, that they have somehow gotten a nice, big bonus from Uncle Sam.

That is false. That tax refund is your money, which you loaned to the government interest-free. You earned it, and you have the choice of what to do with it. Even the IRS recommends that you lower your withholding if you get a large tax refund. See page 2 of IRS Publication 919 at

Does it really matter? Why not get that nice refund? God instead asks you, “What is your motive for wanting one?” To answer that question, remember what you did with past refunds. If you are like most Americans, you used it for an impulse purchase, such as a big-screen TV, or down payment on a new car. Scripture says, “The plans of the diligent lead to profit as surely as haste leads to poverty.” (Prov 27:23, NIV). Big refunds are generally not planned; they are the result of a common mistake: if you own a house, and give even a small percentage of your income to your church or charity, claiming one exemption per family member withholds more than necessary. Haste, on the other hand, is readily evident once the refund check arrives.

You can correct this problem immediately. You may fill out a new W-4 anytime you find that you are having too much or too little tax withheld. Form W-4 and its instructions are available at Page 2 has worksheets that will help you get the correct number of exemptions if you itemize your deductions or have more than one wage earner. Do not be shocked if the correct number of exemptions seems high. The IRS does not care how many exemptions you claim on form W-4 as long as you withhold (or make estimation payments for) at least 90% of your actual tax. Aim for 100% or just over, so that when you file your tax return, you will either receive or pay a small amount.

You will see the results in your paycheck almost immediately. You can then use your money according to God’s priorities, and the plans you and He make together.

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