How MagnifyMoney Gets Paid

Advertiser Disclosure


Don’t Use Your Tax Refund as Forced Savings

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Internal Revenue Service IRS building in Washington DC forced savings

Getting a fat tax refund from the IRS may put a big smile on your face. But before you get too excited, heed the words of hip-hop legend the Notorious B.I.G.: mo’ money, mo’ problems.

A big refund check isn’t a sign you’re getting money from Uncle Sam—in fact, quite the opposite. It means that throughout the year, you’ve granted the government an interest-free loan from your paycheck, and now you’re getting the principal back in one lump sum. You’re not making any more money than if you had taken that cash, buried it in your yard and dug it up in April. Thankfully, there’s a better way.

Don’t use the IRS as a forced savings account

Most Americans only think about their federal income tax once a year, ahead of the April 15 tax deadline. But it’s important to understand that you’re paying income taxes with every pay period. For workers receiving wages, state and federal income tax is withheld by employers with each paycheck (It gets even more complicated if you’re self-employed or a freelancer; you’ll usually have to pay an estimated quarterly tax).

Your employer calculates how much of your paycheck to withhold, ensuring you pay your annual tax bill over time, based on the information you filled out on your W-4 when you start a job. Many people fill out the form without a second thought, but it has an impact on your financial life because it determines the size of your withholding.

On your W-4, you claim a certain number of tax allowances. The more allowances you claim, the less money is withheld from your paycheck. The general rule is that you can claim one allowance for the following:

  • Yourself
  • Your spouse
  • Any dependents you can claim (this will usually be your children, but can be anyone who qualifies under IRS rules)

This list above provides a good baseline for claiming allowances, but maxing out your claims isn’t as simple as taking a tally of everyone at the dinner table.

Claim the right amount of allowances to avoid overpaying

When claiming allowances on your W-4, your goal should be to land on the amount that matches your federal tax liability—how much you owe the government in taxes—as closely as possible. If you do it right, your tax liability should be divvied up precisely and paid off via withholding in each pay period. Get it right, and you won’t receive a tax refund.

How do you determine the correct amount of allowances to claim to avoid the ritual of forced savings and refund checks? The IRS provides personal worksheets with the W-4 form that can help you calculate the maximum amount of allowances you’re entitled to.

Answer the following questions in order to figure out how many allowances you should claim.

Should I claim the Child Tax Credit?

As alluded to earlier, claiming just one allowance for each of your children may mean you aren’t taking all the allowances you could. If you’re claiming a tax credit for each child, the number of allowances you claim for each child depends on your total income, and if you’re filing as a single person or married filing jointly.

Filing Single Married Filing JointlyNumber of Allowances Per Child
Less than $71,201Less than $103,351


$71,201 to $179,050 $103,351 to $345,850


$179,051 to $200,000 $345,851 to $400,000


Higher than $200,000Higher than $400,000


You should also take into account tax credits you will claim for eligible dependents who aren’t your children, which affects the number of allowances you can claim.

Filing Single Married Filing JointlyNumber of Allowances Per Child
Less than $71,201Less than $103,351


$71,201 to $179,050$103,351 to $345,8501 for every 2 dependents ( if you only had one dependent, you would claim 0 allowances. If you had 2 dependents, you would claim 1 allowance)
Higher than $179,050Higher than $345,850


Do I have more than one job? Does my spouse work?

If you’ve fully embraced the cult of the side hustle — willingly or not — or if your spouse also works, and the combined income from all of these jobs exceeds $53,000, you may want to claim additional allowances. The Two Earners/Multiple Jobs worksheet that comes with the W-4 walks you through the many allowances you could claim, but in general the number of allowances you can claim is based on the wages you earn from your lowest-paying job.

Am I claiming itemized deductions?

The Tax Cuts and Jobs Act passed by Congress and signed into law by President Trump at the end of 2017 changed the calculus for many taxpayers who normally devote hours to claiming itemized deductions. “There will be a lot of disconnect this year for people who have relied on itemized deductions that are no longer deductible,” said Michael Goldfine, CPA based out of New York, NY.

The changes to the tax code in 2017 nearly doubled the standard deduction, from $6,350 to $12,000 for single filers (and from $12,700 to $24,000 for married couples filing jointly). This means it usually makes more financial sense to simply claim the standard deduction. If you do that, you wouldn’t claim an additional allowance on your W-4.

However, if you believe the value of itemized deductions you can claim exceeds what you would get with the standard deduction, then the amount greater than the standard deduction figures in to whether or not you should take another allowance.

What other deductions or adjustments should I claim?

You’ll also want to think long and hard about any income you’ve earned that’s not from wages and isn’t subject to federal withholding. Interest earned from bank accounts or dividend payments from stocks, for example, could all contribute to how many allowances you can claim. By filling out the Deductions, Adjustments and Additional Income worksheet with Form W-4, you can estimate the number of allowances this income entitles you to claim.

Don’t claim more allowances than you’re owed

While withholding too much and not claiming as many allowances as your circumstances allow gives the federal government an interest free loan, the opposite — claiming too many allowances and not withholding enough — isn’t ideal either.

If your employer doesn’t withhold enough money from your wages, you can expect to receive a bill instead of a refund check. And if you owe the government more than $1,000, you may also have to pay a penalty fee (which the IRS will happily calculate for you). This is especially true if this isn’t the first time you’ve come up short with Uncle Sam.

“If you owed money last year, and you owe money again this year, you’re going to get underpayment penalties,” said George Dimov, CPA at Dimov Tax Associates in New York City. “That applies to the IRS and to the states. In that case, if you don’t want a penalty, you should overpay.”

The amount the IRS will charge you varies on your individual circumstances, but according to Dimov it’s generally 2% to 3% of the amount you still owe the government — “the IRS has its own proprietary formula to estimate [the penalty],” he added.

In general, you won’t have to pay a penalty if:

  • The amount you owe the IRS is less than $1,000
  • You’ve paid 90% of your tax liability (the IRS lowered this threshold to 80% for the 2018 tax year only to take into consideration how changes to the tax law could confuse tax filers)
  • You paid 100% of your tax liability in the previous tax year

While the fact that you have $1,000 of leeway before incurring an underpayment penalty may tempt you to err on the side of claiming more allowances than you’re strictly entitled, keep in mind one allowance generally equals $4,200. One of the best ways to avoid claiming too many allowances is to only claim those the IRS says you can, per the worksheets included with form W-4.

How Americans are spending their forced savings

Now that you know how to dial in the proper amount of allowances to claim and no longer give the federal government more money than it’s owed throughout the year, you can start putting your income to better use.

The average size of a tax refund so far for 2018 filings is $2,873. According to a National Retail Federation survey of tax filers, 49% of those expecting a refund this year plan on putting that refund money into some sort of savings account or product.

That’s great, except they’ve already lost out on a year’s worth of interest because of overpaying Uncle Sam with each paycheck. If they had claimed more allowances and placed the extra money from their paycheck into a common savings product, here’s how much they would have earned via interest.

 1-Year CDSavings AccountTax Refund
Interest Earned1.373%*0.272%*0
Money earned after a year$39.72$7.83$0

*APY for the 1-year CD and savings account are both based on national averages according to data from as of April 2019; MagnifyMoney and are both owned by LendingTree. Money earned after a year calculated assuming a deposit of $2,873 into either product.

Granted, the money earned from either a CD or a savings account won’t bump you into a higher tax bracket, but think of it this way — would you put your money in an account that offered zero interest? Because that’s what you’re doing when you don’t claim the proper amount of allowances on your W-4 and let the government hold on to your hard-earned cash for a year before paying it back in a big refund check.

The bottom line on your tax refund

Telling people they should feel bad about receiving a big tax refund ranks just above telling children Santa is a lie. And just like believing in Santa, getting a refund check for thousands of dollars might just give some people a warm, fuzzy feeling that justifies the cost.

However, the view through the cold, calculating eyes of a personal finance expert suggests that getting a large tax refund is a lost opportunity to invest money where it earns interest, such as a savings account or CD. You have to decide whether the excitement of that tax refund is worth the money you’re losing out on.

How MagnifyMoney Gets Paid

Advertiser Disclosure


Can’t pay your taxes? There’s a taxpayer advocate who can help

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By


Not receiving a tax refund can be disappointing enough, especially if you look forward to getting a little financial boost each April.

What if you not only don’t get a refund, but you actually end up owing money? Even worse, what happens when you owe more money than you can afford to pay? Going to bat against the Internal Revenue Service by yourself can be annoying at best and downright traumatizing at worst. Luckily, you don’t always have to go through the process alone.

How a Taxpayer advocate can help resolve your tax problem

When you deal with the IRS, it’s possible that you’ll connect with an IRS representative who is helpful and can help you straighten out your tax problems. Other times, unfortunately, you may wait a long time to hear back from the agency, feel that they’re not addressing your concerns or unable to reach an agreement with the IRS on how much you owe.

The federal government has created a free, independent program called the Taxpayer Advocate Service to help. The Taxpayer Advocate Service is not for everyone who owes back taxes — it was created to help specifically when you are having problems dealing with the IRS.

Consider contacting the Taxpayer Advocate Service (TAS) if any of the following are true:

  • Your tax problem is causing you financial hardship.
  • The IRS is not responding in a timely manner.
  • You believe the IRS is not respecting your taxpayer rights. Your taxpayer rights include the right to be informed of IRS decisions about your account, the right to quality service (prompt, courteous and professional assistance), the right to pay no more than the correct amount of tax, rights to privacy and confidentiality, and other rights in the Taxpayer Bill of Rights.

How to get help from the TAS

Start by visiting the Taxpayer Advocate website, which includes answers to many questions and common tax problems. If you still need help resolving problems with the IRS, use the map feature on the website to find contact information for your local TAS office.
It’s not guaranteed that the TAS will accept your case. However, the TAS does have the power to help you when you’ve tried unsuccessfully to resolve your problem with the IRS by yourself. They can do the most good when your case falls into one of these categories:

It’s not guaranteed that the TAS will accept your case. However, the TAS does have the power to help you when you’ve tried unsuccessfully to resolve your problem with the IRS by yourself. They can do the most good when your case falls into one of these categories:

  • If your case needs to be processed quickly in order to avoid causing you more financial harm, the TAS can speed things up. For example, the IRS may need to remove a levy or release a lien when you are having a financial emergency, difficulty or hardship.
  • If your case is complex and different steps and units of the IRS are involved, the TAS can help coordinate the various parts of the process.
  • If you have a unique case that doesn’t work well with the “one size fits all” approach of the IRS, or you feel the IRS isn’t listening to you, the TAS can work on your behalf. They may try to have the IRS issue new guidance, if necessary, for your circumstances.

If the TAS determines that you qualify for help, you will be assigned your own advocate who will work on your case until it is resolved. You can talk to your caseworker by phone, or visit your local TAS office.

5 ways to resolve a tax debt on your own

Don’t panic over a bill from the IRS. You’re not the first person to get behind on taxes, and the IRS has specific procedures to help people like you get back on track. They don’t put people in jail for simply owing taxes; you’ll have to ignore a lot of notices or otherwise test the patience of the IRS before they levy your bank account or take other drastic action.

And not every tax problem means you need the help of a taxpayer advocate. You may be able to resolve your issues in one of these ways:

  1. Make sure you actually owe the tax. Read your tax return carefully from front to back. Look for errors, such as income counted twice, or missed deductions and credits. If you received a letter from the IRS stating that you owe a tax, make sure you understand what you owe and why. In some cases, you may just need to file an amended return, or send a letter of explanation to the IRS.
  2. Pay as much of the balance due as you can afford. Determine how much you can pay without jeopardizing your other expenses, including current taxes. The more you can pay now, the less you’ll pay in penalties and interest. You have several options for paying the IRS, including electronic funds transfer, a paper check or debit or credit card. (Be careful paying by card. It will cost you extra fees, and in some cases, the credit card interest rate is higher than you would pay to the IRS.)
  3. Pay off your tax bill within 120 days, if possible. You don’t need a formal payment plan if you only need up to 120 days to pay the full amount. The penalties and interest will continue to add up until your balance is paid.
  4. Ask for an installment plan if you need more than 120 days to pay. You can apply online for a formal payment plan. You’ll have to pay an application fee, plus penalties and interest until your debt is paid in full.
  5. Consider an Offer In Compromise (OIC). If you are way over your head in tax debt, you can request an Offer in Compromise so you can pay less than the total amount owed. You should only ask for an OIC as a last resort, and you will have to pay fees and fill out forms to apply. Use the IRS Offer in Compromise Pre-Qualifier to see if you are eligible to apply.

If you are in financial distress and can’t make any tax payments right now, the IRS may set your account as “Currently Not Collectible.” This doesn’t resolve your debt, and the interest and penalties continue to accrue. However, it does stop IRS collection activities as long as your account is in this status. You generally do not need a taxpayer advocate to have the IRS make this determination. To request this status, contact the IRS at 1-800-829-1040 or the phone number on correspondence you have received from the IRS. You may be required to complete a Collection Information Statement and submit documentation.

Avoid future problems with the Internal Revenue Service

If you’ve ever had more than the briefest encounters with the IRS, you’ll appreciate the importance of avoiding such encounters as much as possible in the future. Read these tips to see how you can avoid most future tax problems:

  • Learn about taxes. The tax code has changed significantly thanks to recent tax reform initiatives, and you need to know how the changes affect you.
  • Plan and organize your finances. You can only do so much about your taxes after the end of the year, when you’re scrambling to find receipts and paperwork and possibly getting hit by a big tax bill. Try to estimate your tax year ahead so you can do better tax planning and avoid surprises.
  • Prepare and review your tax return carefully. Making mistakes, such as not including all your income that is reported on 1099 forms, is the fastest way to get the attention of the IRS. If you prepare your own return, use tax software to improve accuracy. It’s also important to always file your return on time, even if you can’t pay the balance.
  • Adjust your income tax withholding or estimated tax payments. If you owed money when you filed your return, you may need to pay more throughout the year. Not only will you avoid a large one-time bill, but you may save interest and penalties as well.

How MagnifyMoney Gets Paid

Advertiser Disclosure


How Soon Do You Get Your Tax Refund?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Reviewed By


One of the few silver linings of tax season is the potential to get a tax refund, which can be a much-welcomed infusion of cash that can be used to pay off debt, replenish savings or reach other financial goals. In a recent study of the tax period from 2013 to 2017, we found 77% of taxpayers in the largest 100 metros received a tax refund and the average refund was $3,016.

If you’re wondering how long it will take for your tax refund to hit your bank account, the answer is fairly straightforward.

  • If you e-file and choose to have your refund deposited directly, the majority of taxpayers receive their refunds within 21 days of submitting their returns to the IRS, according to the agency.
  • If you choose to file your taxes by mail, it can take six to eight weeks to receive your tax refund.

But the method you use to file your taxes isn’t the only factor that determines when that cash will hit your bank account. Read on to discover how you need to do your taxes this year to get your refund as quickly as possible.

How to get your tax refund quickly

The speed with which you’ll receive your tax refund largely depends on three choices you made when filing your taxes: how you file your returns, how you request to receive your refund and what credits you claim.

Choose e-file for the quickest tax refund

Although some 88% of taxpayers last year filed online, some Americans prefer filling out their tax returns on paper and sending them to the IRS via mail. Since the government can’t begin working on your refund until it receives your return, it’s in your best interest to make sure Uncle Sam gets the paperwork as soon as possible.

Depending on how you choose to receive your return (more on that below), filing your returns via mail will have you waiting six to eight weeks for your returns. You can cut that timeline in half by e-filing.

Filing your taxes electronically doesn’t necessitate purchasing a tax-preparation software. If your income is $66,000 or below, the IRS offers its own tax-prep software for free, and if you earn more, the government still offers electronic versions of all the forms you need. Simply fill them out yourself and file electronically (more info can be found in the IRS’s guide).

Check out our round-up of the Best Tax Software in 2019 here, which has a handy list of free options, as well as recommendations for small business owners and the self-employed.

Choose to receive your refund via direct deposit

If the IRS has to mail your refund check to you, it could take more than a month to reach you.

The IRS encourages filers to request their tax refund via direct deposit into a bank account in order to minimize the wait time.

If you e-file and choose direct deposit, you will likely get your refund within that 21-day window. However, it may take up to five additional days for your bank to deposit that money in your account(s).

You can give the IRS the account and routing number for up to three accounts when you file (or when prompted by tax preparation software), and the IRS will provide your refund to your bank.

Reasons your tax refund might be delayed

There were errors in your tax return

When it comes to filling out your returns, little mistakes can lead to major delays. Misspelling names, inputting the wrong social security number or choosing the wrong filing status are all examples of errors that can cause the IRS to delay processing your return, which in turn delays your refund. If this happens, you’ll likely get a call from the IRS asking for the correct information.

Of course one of the easiest places for an error to occur is with your math, particularly if you are filling out your returns without the aid of tax software or a tax professional. If you majored in comparative literature and don’t engage in any math more complicated than calculating the tip, you may want to double (and then triple) check your calculations.

Your direct deposit information was incorrect

To avoid any delays in processing your tax refund, you need to make sure the direct deposit account is either in your name, your spouse’s name or a joint account shared between you. Also be sure the account and routing numbers are correct, otherwise you’ll have to wait for the IRS to be alerted that an error exists and then mail you the refund by paper check—a delay that can take several weeks.

You claimed certain tax credits

If you haven’t received your refund in your bank account and wonder what’s the holdup, it could be because you claimed either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC).

Because of the Protecting Americans from Tax Hikes (PATH) Act, the IRS can’t issue refunds to anyone who claimed either of these credits before the middle of February 2019. The earliest the agency expects anyone claiming these credits will see their refunds in their bank accounts is Feb. 27, 2019, meaning early filers this year may have to wait longer than usually to get their refund.

The Earned Income Tax Credit helps those earning low-to-moderate incomes with a tax credit. For the 2018 tax year, a single person without any qualifying children who earns $15,270 a year or less qualifies for the EITC. More info on qualifications can be found here.

The Additional Child Tax Credit is a credit claimed by taxpayers with qualifying children as their dependents. Typically, the child has to be under the age of 17 at the end of the tax year and live in your household. Under the Tax Cuts and Jobs Act, taxpayers can claim up to $2,000 for each qualifying child. More information about who qualifies can be found here.

Blame the government shutdown? Not so fast.

With the recent government shutdown, federal agencies like the IRS were hamstrung for more than a month, leading some to worry that the agency would be slower to process returns in 2019. In reality, the impact to tax refund processing should be minimal, the agency says.

The IRS announced at the end of the shutdown that it “will issue refunds as soon as possible and expects many early refunds to be paid in mid- to late February like previous years,” and so far there aren’t any reports of widespread delays. “We haven’t seen anything yet either way,” said James J. Burns, CFP and president of JJ Burns & Company based in Melville, N.Y. “Most people haven’t filed their returns yet.”

How to check the status of your tax refund

The IRS has helpfully provided an online tool, “Where’s My Refund?” that allows you to check your refund status. You can use this tool within 24 hours after IRS receives your electronically-filed returns (or four weeks after you mailed a paper return). Simply provide your social security number (or individual taxpayer identification number), filing status (single, married, etc.) and the exact refund amount, and the tool will give you one of three status updates:

  • Return Received
  • Refund Approved
  • Refund Sent

As soon as your refund clears the “Refund Approved” stage, the IRS should give you a date on when it will issue your refund.

Where should you save your tax refund?

To maximize your refund’s earning power, make sure you’ve got a savings account that earns a competitive interest rate. Here are a couple of great savings accounts available today.

How MagnifyMoney Gets Paid

Advertiser Disclosure

Minimum Account Balance to Earn APY
High Yield Savings from Synchrony Bank
High Yield Savings from Synchrony Bank



HSBC Direct Savings from HSBC Direct
HSBC Direct Savings from HSBC Direct




on HSBC Direct’s secure website

Member FDIC

Last tax season, Americans received an average refund of $2,899, according to the IRS, and while plenty of people plan on using the cash from a refund to help pay for vacations, trips to the spa, or even day-to-day expenses, a better course of action involves looking at how your refund money can help you achieve your long-term financial goals.

“It’s going to be different for everybody, depending on what their priorities are,” said Joy Liu, financial advisor at The Financial Gym in New York, NY. Liu advocates splitting the refund between paying down any high-interest debt you’re currently carrying and saving it in an online high-yield savings account you can tap in case of emergencies. “It’s going to return a higher yield than traditional banks can offer, so their money starts to make money,” she said.

Liu recommends saving three to six months’ worth of expenses in this account, which you can rely on when the furnace dies in the middle of a polar vortex and you need to pay for repairs or a replacement immediately.

If you feel you have enough money squirreled away to cover emergencies and don’t have any immediate pressing needs for cash, there’s always saving for the future. Putting the money into a Roth or traditional IRA can help you get a jump start on maximizing your contribution for the year, which is like giving the gift of not having to flip burgers to your future self.

The bottom line on your tax refund

If you want to make sure your tax refund gets to your bank account as quickly as possible, make sure to file return electronically and ask to receive your refund via direct deposit. You should receive your refund within 21 days after filing. Once you receive your refund, consider investing in your future by saving the money in a high-yield savings account offered by an online bank and congratulate yourself on surviving another tax season.