Overwithholding

Situation in which a taxpayer has too much federal, state, or local income tax withheld from salary. Because they have overwithheld, these taxpayers will usually be due income tax refunds after they file their tax returns by April 15. Overwithholding is not desirable for the taxpayer, because it is, in effect, granting the government an interest-free loan. To reduce overwithholding, a taxpayer must file a new W-4 form with his or her employer, increasing the number of dependents claimed, which will reduce the amount of tax withheld. See also Underwithholding.