Refunds will be delayed for 2016 tax returns. Starting with 2016 tax returns that are due in 2017, the IRS will delay refunds at least until February 15th for taxpayers claiming the earned income credit or the refundable child credit. Additional refund delays will result from measures taken to combat ID Theft and other refund fraud. And it is possible that other delays may result from W-2 matching to the filed employer copies.
A procedure or “trick” to get your refund quicker, takes a little extra work and discipline on your part.
First: Look at your prior year (2015) tax return Form 1040, line 63 “total tax.” I will use $10,000 as an example here.
Multiply the line 63’s $10,000 by 110% = $11,000. Now look at your most current 2016 paystub and see how much federal income tax withholding (WH) there is year-to-date. For this example, lets assume you have $12,200 WH so far in 2016. Since the WH is greater than $11,000 you generally should have no late payment or under withholding penalty assessed as of April 15, 2017.
Step #2 Fill out a new IRS Form W-4 filing in a larger number on line 5, than you had previously filled in and give it to your employer so that your next week’s payroll will have much less WH and as a result your net pay will be larger.
Step #3 is where the discipline comes into play. Take the increased amount of your net pay and deposit it into a separate bank account. Do this each payday for the remained of 2016. On January 2, 2017 submit a new Form W-4 using the original number that you had on line 5.
Step #4 when your 2016 tax return is done the computed refund should be much small than you are normally used to because of the reduced WH in Step #2. Once you file the tax return claiming the smaller refund, go and withdraw the money that you have been socking away in the bank account established in Step #3. You now have your refund immediately. Note: If your 2016 tax return shows a balance due, use funds from the bank account to pay the balance due to the IRS (without penalty or interest), and you should still have the remaining funds as your refund – immediately. And no fees for anything like a refund anticipation loan either!