Core Insights - The average tax refund in 2025 was approximately $3,000, indicating that many taxpayers are overpaying the IRS by withholding too much throughout the year [1] - Common reasons for overpayment include outdated W-4 forms, missed deductions, and unclaimed credits, particularly affecting dual-income households and those with equity compensation [2][3] - Adjusting W-4 forms to accurately reflect dependents, credits, and actual income can help taxpayers avoid excessive withholding and large refunds [3] Reasons for Overpayment - Taxpayers often provide the IRS with an interest-free loan due to incorrect withholding practices, leading to larger refunds than necessary [2][3] - Signs of overpayment include oversized refunds, inconsistent paychecks, and low take-home pay, with a refund of $1,000 or more being a key indicator [4] Missed Tax Breaks - Many taxpayers fail to claim valuable credits and deductions, such as the saver's credit, child and dependent care credit, and student loan interest deductions, which could reduce their tax bills [5] - Renters and homeowners often overlook state-level benefits and energy-efficiency credits, respectively, as well as charitable contributions made through payroll or stock donations [5] Monitoring Overpayment - Mid-year checks can help taxpayers assess whether they are on track for a large refund or unexpected tax bill by reviewing year-to-date withholding against projected income [6] - Taxpayers receiving equity compensation should conduct mid-year reviews, as bonuses and restricted stock units can unexpectedly increase tax liability [6]