It may be better to owe taxes in April than to get a refund, and for the 2017 tax filing season, it’s especially important. There will be a holdup on refunds, for income tax filing this year. The Internal Revenue Service today issued a warning of 2017 tax refund delays for certain taxpayers. They urge folks to adjust their tax withholding now. We’re talking about your 2016 taxes that are due April 15, 2017. There’s good reason to pay attention.
“We don’t want people caught by surprise if they get their refund a few weeks later than previous years,” said IRS Commissioner John Koskinen in the release.
In December of 2015, Congress passed the Protecting Americans from Tax Hikes (PATH) Act of 2015. This small document, numbered 233 pages in length. The effect that this law has on early filers is covered in two pertinent areas. They bring this to the public’s attention.
- The IRS announced initial plans for processing tax returns involving the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) during the opening weeks of the 2017 filing season. The IRS is sharing the information now to help the tax community prepare for the 2017 season. They also plan a wider communication effort later in the summer and fall. This will be to alert taxpayers about the changes that will affect some early filers. New tax law effective next year requires the IRS to hold refunds a few weeks for some early filers. These are the ones who claim the Earned Income Tax Credit and the Additional Child Tax Credit. Also, the IRS has to hold the entire refund, not just the portion associated with those credits. The hold will be effective until at least February 15.
- There has been a huge spike in identity theft. Effectively, the IRS and state tax authorities will be spending additional review time to protect against fraud. Additional safeguards will be set in place for the upcoming 2017 filing season, representing the 2016 income tax returns. “We want people to be aware we are taking additional steps to protect taxpayers from identity theft, and that sometimes means the real taxpayers face a slight delay in their refunds,” Koskinen said.
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We strongly recommend that you take a good look at your withholdings for the remainder of the year. You should make adjustments accordingly. If you are over withholding, you may want to consider changing your withholdings exemptions for the rest of the year.
The IRS strongly recommends that taxpayers who have income outside of wages and salaries pay estimated taxes in quarterly installments. This includes income from self-employment, capital gains, interest and dividends. However,if you don’t anticipate the taxes due will be over $999, you don’t have to make estimated payments. Of course, this is taking into consideration taxes already withheld through your paychecks.
Also, taxpayers, who pay estimated taxes, as a general guideline, usually use the “prior year safe harbor.” That means simply that they pay in 100% of the prior year’s tax as estimates. Or they should pay 110% if their adjusted gross income was above $150,000. Using the 100%/110% prior year safe harbor is easy. But in some case it means you’re overpaying. There is an alternative rule. Instead, pay in 90% of your current year estimated tax to avoid penalties for underpaying estimated tax payments, is to.
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