The Internal Revenue Service is urging taxpayers to review their tax withholding formula because there are “several new factors” that could delay tax refunds in 2017. By adjusting how much an employer withholds from a paycheck, taxpayers can avoid having to wait for refunds.
“Taking a closer look at the taxes being withheld can help ensure the right amount is withheld, either for tax refund purposes or to avoid an unexpected tax bill next year,” the agency states.
A new tax law change requires the IRS to hold refunds a few weeks for some early filers in 2017 who claim the Earned Income Tax Credit and the Additional Child Tax Credit.
Additionally, the IRS and state tax administrators continue to bolster identity theft and refund fraud protections, which means some tax returns could face reviews again next next year under extended precautionary measures.
“With these changes, it makes good sense on many different levels to check on your withholding and plan ahead for next tax season,” said IRS Commissioner John Koskinen. “It’s a personal choice if you want to have extra money withheld to get a bigger tax refund, but you have options available if you prefer to have a smaller refund next year and more take-home money now.”
So far in 2016, the IRS has issued more than 102 million tax refunds out of 140 million total individual returns processed, with the average refund well over $2,700. Historically, the refund figure has increased over time in size.
By adjusting the Form W-4, Employee’s Withholding Allowance Certificate, taxpayers can ensure that the right amount is taken out of their pay throughout the year. This way “they don’t pay too much tax and have to wait until they file their tax return to get any refund,” the IRS says. Employers use the form to figure the amount of federal income tax to be withheld from pay.