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A Big Refund Isn't Great News

If too much tax is withheld during the year, you get a refund. At the mid-point of this tax-filing season, the Internal Revenue Service reports that the average refund is $2,436 -- a record amount and more than $200 higher than last year.

If you received a large refund this year or expect to, you need to review your federal and state withholding information to make sure it reflects your current tax situation. If your tax situation changes -- you get married, have a child, buy a home -- you should fill out a new form.

_____Tax Time 2005_____
Numbers Crunch
Singletary: Fix Your Withholding
Find the Best Deductions
Tax Ambushes For the Unwary
Steps Toward A Happier Return
Ways to Reduce A Big Fat Tax
Off-the-Shelf Programs Secure Data
Complete Coverage/Resources

_____Column Archive_____
Bankruptcy Bill Lingers in the Ring (The Washington Post, Mar 3, 2005)
Honey, I Stretched The Fiscal Truth (The Washington Post, Feb 27, 2005)
Read Michelle's Past Columns

The amount of money withheld from your paycheck is determined by the number of allowances you claim on your W-4. The W-4 has a worksheet to help you figure out how many personal allowances to take, based on what tax deductions or credits you expect to claim on your return. You can also use the IRS online withholding calculator at www.irs.gov. In the search box, type "withholding calculator." You will need your most recent pay stub and a copy of last year's tax return.

This is the time of year to check your withholdings. The earlier in the year you change them, the more likely it is that you will have the right amount of tax withheld. Here are some other situations that could affect the number of you allowances you take:

• You or your spouse start or stop working, or start or stop a second job.

• You expect to take a deduction for interest paid on a student loan.

• You have other interest expenses that are deductible, such as interest paid on your mortgage loan.

• You expect to take a deduction for unreimbursed medical expenses.

• You have deductible job expenses.

• You give money to charity.

If you need help figuring out if you're having too much (or too little) withheld from your paycheck, get IRS Publication 919, "How Do I Adjust My Tax Withholding?"

So, if you get a big refund for 2004, and for the most part your income and your tax deductions or credits will remain the same for the next tax year, you need to update your W-4.

And don't be intimidated by the calculations. It's worth it to muddle through to get more money in your hands throughout the year. Besides, the IRS calculator is relatively easy to use.

And if the reason you get a big refund every year is that you can't trust yourself to save the money, then it's time to automate: Have a certain amount of money directly deposited from your pay into a savings account. Think about it. Could you handle your money any worse than the federal government, which is running a deficit? (Just joking, don't answer that.)

Join Michelle Singletary at 6:40 p.m. tomorrow on "Insight" with Stephanie Gaines-Bryant on WHUR, 96.3 FM. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or send e-mail to singletarym@washpost.com. Comments and questions are welcome, but because of the volume of mail, personal responses may not be possible. Please also note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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