“my 2009 AGI was around 17,000 dollars and my refund was about 1,500 dollars.My 2010 AGI was around 6000 dollars and my refund is just 600 dollars. Why is that?”---> As you can see, your ER uses ther information from your W4to compute the amount of your income tax to withhold and remit part of your earnings to the IRS from your wages. Under- or over-estimating your tax liability is not a criminal act, assuming that you pay any amount due when you file taxes. Reducing the number of allowances on the W-4 will increase the amount withheld from you paycheck and likely result in a tax refund. Overestimating the number of allowances will result in a reduced withholding and you could owe the IRS additional money when you file your taxes. REMEMBER: the number of withholding allowances claimed on your W-4 MAY differe from the number of exemptions claimed on your tax return. If you usually receive a large refund, it would be wise to look at your deductions you have marked on your W-4 with your employer. If you change your deductions and have less deducted from each check you could either use that on other expenses throughout the year or save it and use it to buy something like you use your tax refund. If you do receive a large tax refund, you are essentially giving the government a tax-free loan.