This sounds like a problem I would like, but my Federal Tax refund is too big. This year it was over $2500, last year $2100+, the year before $1700+. I would like an idea of how this is happening and why the W4 says I should pay more before actually changing my withholding. I suspect it's happening because you're itemizing deductions and the withholding is calculated using a standard deduction. There's no way an employee can know what your itemized deductions will equal. I had this same problem years ago when I bought my first house. Even though I was single, I had to claim 3 exemptions before my withholding got close to what I actually owed. If you've gotten a large refund three years straight, I would go ahead and claim another exemption, regardless of what the instruction sheet says. It doesn't know all your financial information.
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