By now, you’ve probably filed your income tax return for 2008. If you had to write the IRS a big check or if you’re already waiting by your mailbox for a fat refund, you may want to take a second look at your current federal income tax withholding.

For wages and certain other income, federal income taxes are “pay as you go” taxes, meaning that you pay them by having an amount withheld from your income during the year —  this is your “withholding.” Your withholding amount is determined on the basis of information you provide to Northrop Grumman on IRS Form W-4.

The IRS and many financial experts recommend that you try to have your total withholding close to your actual tax liability.

The consequence of withholding too little is easy to see: At the end of the year, you will owe the IRS the balance and possibly interest and a penalty. But even though the consequence of withholding more than you have to — and getting a tax refund — seems like a reward to many taxpayers, that refund may disguise costly disadvantages.

“Over-withholding” may seem like an effective way to save money. You don’t see that money and you can’t touch it during the year, so you don’t spend it. It’s certainly a good way to keep your hand out of the cookie jar.

But consider this: Would you deposit that same money into a bank account that paid no interest and gave you no way to access your balance (except once a year after forcing you to fill out pages of paperwork)? A bank with these types of restrictions wouldn’t be in business long.

Here are three alternatives that could produce better results:

1. Increase your contributions to the Savings Plan. If you aren’t saving all you can in the plan, consider upping the ante. If you are saving as much you can, you also may consider contributing to an individual retirement account (IRA).
2. Pay down other debt. Generally, you should start by paying off higher-interest credit cards or loans.
3. Build your cash reserves. Many experts recommend having an amount equal to at least three months’ of expenses available in cash. Or, you can use your reserves for a vacation, a high-priced item or other near-term purchases.

It’s a good idea to review your withholding rate each year and whenever your tax situation changes.

The IRS provides an easy-to-use online calculator that can help you determine a withholding amount that will allow you to meet your anticipated income tax requirement for the year — without going too far over or under. Visit http://www.irs.gov/individuals and then click IRS Withholding Calculator.

This Investment Center includes links to tools and information provided by organizations that are not associated or affiliated with Northrop Grumman. The tools and information provided by these organizations are not the property of Northrop Grumman, and Northrop Grumman is not responsible for their accuracy, completeness, or continued availability. You are solely responsible for the investment and asset allocation decisions you make pertaining to your personal savings and investments, including investments in the Northrop Grumman Savings Plan, Financial Security and Savings Program, and any other savings plans sponsored by Northrop Grumman.