Is getting a big tax refund actually good for your finances?

So if I'm understanding correctly, it's not about getting zero back exactly, it's about finding the right balance? Is there any downside to owing a small amount when I file instead of getting a refund?

You're exactly right about finding the right balance. While zero would be mathematically perfect, a small refund gives you a safety margin. There's no inherent downside to owing a small amount when you file, as long as you've paid enough throughout the year to avoid underpayment penalties. The IRS generally wants you to pay at least 90% of your tax liability during the calendar year. The potential issue is psychological - many people find it stressful to owe money at tax time, and you need to be disciplined about setting aside funds to cover what you'll owe.

Does it work for more complicated situations? I have W-2 income plus some 1099 gig work, and I never know how to balance my withholdings properly.

I've tried other tax calculators before and they always seem to give me wildly different numbers than what actually happens at tax time. How accurate was it for you when you actually filed?

It absolutely handles more complex situations including mixed income sources. They have specific calculators for W-2 plus 1099 income that help you determine both withholding adjustments and estimated tax payments. When I filed this year, the estimate was within $180 of my actual tax liability, which is pretty impressive considering all the variables involved. Far more accurate than other calculators I've tried, probably because they use actual tax code calculations rather than simplified formulas.

How does this actually work? I thought it was impossible to get through to the IRS these days. Is this service just putting you in the regular queue somehow?

Sounds like a scam to me. Why would I pay someone else to call the IRS when I can just stay on hold myself? And how do they magically get through when millions of other callers can't?

The service uses an automated system that navigates the IRS phone tree and waits on hold for you. When an agent finally picks up, you get a call connecting you directly to them. It's the regular IRS queue, but they're doing the waiting instead of you. They can get through because their system is constantly dialing and navigating the phone tree, using patterns they've identified about when call volumes are lower. It's not magic - just technology and persistence that most individuals don't have time for. It saved me literally hours of being on hold, and the information I got was exactly what I needed to fix my withholding issues.

But couldn't you just set up automatic transfers to your Roth IRA every month with that extra money? Wouldn't that be better than waiting a whole year?

That's a fair point about automatic transfers, but research on lump-sum investing vs. dollar-cost averaging is mixed. In most historical periods, investing a lump sum at the beginning of the year actually outperforms spreading it out monthly. The bigger factor is psychological. I've tried setting up those automatic transfers before, but I kept finding reasons to pause them "just for this month" when expenses came up. The tax refund method forces me to save that money, and I enjoy the ritual of making my full IRA contribution right after filing my taxes. Different approaches work for different people, and I've found this works best for my actual behavior rather than my ideal intentions.

You need to submit a new W-4 form to your employer. It's fairly straightforward: 1. You can get the form from your HR department or download it from irs.gov 2. The current W-4 doesn't use "allowances" anymore - instead you directly enter dollar amounts 3. If you want less withheld (bigger paychecks, smaller refund), you'd use Line 4(b) to list deductions or use the worksheet to calculate an additional withholding amount Most payroll systems also have an online tool where you can update your W-4 electronically without filling out the paper form.

Thank you, that makes sense! I had no idea it was called a W-4, I was looking for some kind of "withholding adjustment request" or something. Will definitely talk to our HR person tomorrow.

Not odd at all - I've heard financial advisors call this "defensive financial planning." Sometimes the mathematically optimal choice isn't the best one when you factor in real-world complications. As long as you're making an informed choice rather than just defaulting into it, I think that's totally reasonable.