One of the techniques to combat identity theft used by the IRS and state tax jurisdictions is to delay the issuance of taxpayer refunds. So while the IRS encourages taxpayers to file early to minimize identify theft, the IRS’s may decide to delay the issuance of your refund check to combat ID theft. In fact, if a taxpayer is claiming the Earned Income Tax Credit or the Additional Child Tax Credit, the IRS is required by law to delay by a few weeks the issuance of the refund. This delay of issuing refund checks may likely also apply to those who seek tuition credits.
Where the IRS says that it issues most refunds in less than 21 calendar days, it is not uncommon for taxpayers with large refunds to have to wait 10-12 weeks to receive their refunds. During this extended period, the IRS is checking with third parties and the IRS’s internal records of the taxpayer’s filing history to determine if the refund claim appears legitimate. Taxpayers who are concerned about the status of their refund claims need to contact the IRS. The IRS has on its website a Where’s My Refund tool that will show you if the IRS has received your tax return and if your refund claim is being processed.
Whereas many taxpayers like the idea of receiving a large refund from the IRS, this approach may not be healthy in today’s identify theft environment. The “good news” is that you are not a victim of ID theft and the IRS is simply delaying the issuance of your refund. You will eventually receive it. The “bad news” is that you discover that you are a victim of identity theft and your refund claim could be delayed 6-12 months while the IRS investigates your claim.
IRS Commissioner John Koskinen stated that “With these changes, it makes good sense . . . to check on your withholdings and plan ahead for next tax season.” We encourage all taxpayers to meet with their tax professional during the year to discuss life-changing events (e.g., changes of marital status, dependents, and employment). The tax professional can prepare a pro-forma 2016 tax return for the taxpayer that provides the taxpayer with an estimate of their tax liability for the year and whether there will be a balance due the IRS or a refund due the taxpayer. Once the projected tax liability is computed, taxpayers can easily increase or decrease their federal income tax withholdings by providing their employers with a revised W-4 form and changing the marital status or withholdings on that form. By estimating your 2016 taxes and your withholdings in the remaining months of 2016, you can reduce your taxes withheld to avoid that large refund.
If you want to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.