This is the first installment of the Ask CPA Sam blog. I will be answering questions submitted to me through this blog and through PaycheckCity.com’s contact page.

Q. I get a large tax refund every year. It really helps me pay my bills. Some people says it’s not so good. Can you explain?

A. This is one of the most common questions from my tax practice. The simplest way to look at this is that a big refund is an interest-free loan to the government. You pay penalties when you underpay, but get nothing if you overpay. Your best bet is to make use of your money during the year and get your tax liability to match your payments. Tax liability is the amount you actually owe found on line 63 of the 1040 tax return form. Your payments are the amount withheld from each paycheck. If managed correctly, your refund will be small, or you may pay a little extra in. This way, you have more take home pay and can either invest the difference or pay off your bills a little earlier than you thought.

You can adjust your federal withholding by submitting a new Form W-4 to your payroll department. Your state may have a similar form. You can find a very comprehensive list here.