A big tax refund can be a lifesaver, but is it better to withhold less and pay more later?

Every tax season, millions of Americans eagerly await their refund check. It's often called the “biggest payday of the year.”

But should it be? 

A refund is money that rightfully belonged to you, which the IRS has been collecting and holding all year until you file your taxes. It’s money you overpaid to the agency during the year through paycheck withholdings that the government has been able to use but you haven’t. 

To some taxpayers and financial experts, if your refund check is $3,000, that’s money you could have had in your hands during the year that instead, the government had.

Others argue that having the government hold that money for you isn’t bad and helps people end up saving more.  

What’s the best thing then to do financially? It depends on what you’re comfortable with and what your goals are.

Here are the pros and cons:

Is getting a big tax refund a good thing? 

No, some financial experts and taxpayers say, because it means you’re giving up too much of your paycheck to taxes during the year. If less is taken out for taxes, you’ll get a smaller refund but more money in each paycheck for expenses or saving and investing, they argue.  

Some taxpayers go a step further and aim to owe the IRS money each year.  

“My goal every year is to owe $1,000 or a bit less,” said Andres Olarte, a software developer in Chicago, Ill. “That way, I avoid paying penalties to the IRS and get to keep as much of my money as possible, even if it’s in a savings account.”  

The IRS charges you an underpayment penalty if:

• You owe less than $1,000 OR 
• You paid at least 90% of the tax you owe for the year or 100% of the tax shown on the return for the prior year, whichever is less. 

When are deadlines and refunds?Tax deadlines to keep in mind with Tax Day coming up

Can a big tax refund be good? 

Yes.  

People look forward to a big chunk of money. They expect it and use it for good, like paying down debt or savings, says Mark Steber, chief tax information officer at tax preparer Jackson Hewitt. 

Of the 8,415 U.S. adults who expected a refund last year, half said they planned to save it, one-third said they would pay down debt and 28% answered they would use it for everyday expenses, according to a survey by Prosper Insights & Analytics and the National Retail Federation, a large trade association for stores and restaurants that polls people on their spending and saving habits.

If Americans got that little extra money in their regular paychecks, they might immediately spend it instead. But a mom who gets a $180 lump sum can now make rent, Steber said. 

“Money these people get on the single largest payday is life-changing,” he said. 

Brick-and-mortar bank savings rates linger around 0.5%, the Federal Deposit Insurance Corporation said. So, $3,000 would have garnered you $15 extra dollars for the year, which doesn’t seem so life-changing, he noted. 

How do I adjust my withholding if I want to manage my refund? 

You can use the IRS’ tax withholding estimator, which will show you roughly how much you might owe or get refunded.

To get an accurate estimate, make sure you have your pay stub and your spouse’s -- if that’s applicable -- and a recent tax return. You’ll have to enter information like filing status, income and sources, current tax situation, and deductions you're planning to take.   

If you decide you want to change your withholding, complete a W-4 form and submit it to your company’s human resources department. You should be able to do this as many times as you want to adjust for changes in your living situation. 

“I do some back-of-the-napkin calculations two or three times a year," said Olarte, the software developer in Chicago. It's a way to make sure "my paycheck deductions are on track.”

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.