Millions of taxpayers claim an income tax refund each year. Luckily, there is a way to begin collecting your 2017 refund now.

Millions of taxpayers claim an income tax refund each year.Generally, receiving a payment from the IRS for a few thousand dollars can be a satisfying influx of cash. However, this essentially means you were giving the government an interest-free loan for nearly a year, which may not be the best use of your money.

You can review the amount of money you’re having withheld and/or what estimated tax payments you are making and adjust them to keep more money during the year.

Reasons to Modify Amount of Cash Withheld
It’s especially important to check your withholding and/or estimated tax payments if:

  • You received an especially large 2016 refund,
  • You’ve gotten married or divorced or added a dependent,
  • You’ve purchased a home,
  • You’ve started or lost a job, or
  • Your investment income has changed significantly.

Even if you haven’t had any major life changes during the past year, changes in the tax laws may affect withholding levels, making it worthwhile to double-check the amounts being held or estimated tax payments.

Making a Change to Withholding Amounts
You can modify the amounts being withheld any time during the year, or even several times within a year. Simply submit a new Form W-4 to your employer, and changes typically will go into effect a few weeks after the new Form W-4 is submitted. For estimated tax payments, you can make adjustments each time quarterly payments are due.

While reducing withholdings or estimated tax payments will, indeed, put more money in your pocket now, you also need to be careful that you don’t reduce them too much. If you don’t pay enough tax during the year, you could end up owing interest and penalties when you file your return, even if you pay your outstanding tax liability by the April 2018 deadline.

Contact your advisor to determine what your withholding or estimated tax payments should be for the rest of the year.