With the rise of identity theft, the IRS will likely delay tax refunds and increase audits in the future. According to the Taxpayer Advocate, identity theft cases jumped 157% from fiscal year 2011 to fiscal year 2013; this clearly shows no slowing down of IRS identity theft in the near future.
Do you use the IRS as a savings institution? Does it make you feel good to receive a large tax refund to do those much needed home repairs? Well, now is the time to change your thinking, because you may not be able to get your refund when expected from the IRS. Due to the identity theft epidemic the IRS will likely increase their efforts to reduce fraudulent refunds to crooks by creating more flags and delay refunds.
Why let the IRS hold your hard earned money? The average refund is approximately $3000, which equals $250 per month that you could use to pay down debt or deposit into an interest bearing savings account. Do not get caught up in promises of large refunds by some tax preparers; have use of your money each pay period.
Now is the time to adjust your W4 withholdings to at least break even. With the proper tax planning throughout the year you can minimize your tax refund. The more exemptions the less taxes withheld so you must be careful not to claim too many exemptions and end up with a tax balance.
Planning is relatively easy. Notify your tax professional when you make life changes, such as purchasing or selling a home, divorce, etc- these changes will impact your taxes. Ask them to provide you with a new W4. If, you prepare your own taxes, use the withholding calculator at www.irs.gov to figure your withholdings, and complete a new W4 to give to your employer. I recommend you review your withholdings twice per year to ensure accuracy.
Taking these steps will guarantee that even if you are a victim of identity theft, or your return is randomly flagged by the IRS- you will not have to wait for a refund.