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Financial Expert: Give yourself a raise, take more withholding

Kiplinger editorial director says W4 adjustment delivers more cash

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As you crunch the numbers for your 2014 tax return, chances are you will be getting a refund that is near the national average of $2,900.

[WEB EXTRA: Tax withholding calculator ]

Kiplinger Financial Magazine's editorial director, Kevin McCormally, said you could have had that money in the form of a $250 monthly increase in your paycheck.

"One-hundred-million Americans pay too much tax every payday through over withholding," McCormally said. "And then get their refund back in the spring if a crook doesn't get it first."

McCormally said about 5 million Americans have had their tax information compromised by hackers who slip into the system and walk off with refund checks, personnel information or both.

The veteran financial journalist said he's been preaching the "no refund strategy" for the last 25 years, but with the advent of electronic or e-filing, the idea has another purpose: security.

"If you don't have a refund coming nobody can steal your refund," McCormally said. "All a crook has to do is make up a W2-form, and with electronic filing, they don't even have to make up a phony W2-form."

McCormally said most families see the refund as a sort of "forced savings plan," but having that extra money to use now, in his view, makes more sense.

Kiplinger has provided a calculator based on three questions that will help you adjust your W4 withholding and deliver more cash flow now instead of a year from now:

  • Your filing status (Single, Married, Married filing separately)
  • Last year's taxable income
  • Last year's refund

McCormally said it's a strategy that will work for "99 percent of the people that use it."

"You will not only protect yourself from fraud next year, you'll get more money this year so you can spend it on yourself," McCormally said.

Click here to try the calculator.