If you file your taxes early, your refund could be delayed in 2017 -- here's why

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The end of October might not be a time when you're typically thinking about your tax strategy, but thinking about tax planning on a year-round basis will make your life easier come Tax Day, usually April 15th.

In any given year about 150 million Americans will file a tax return with the federal government, and the federal government will issue a refund check to about 80% of those tax filers. Over the past three years the average tax refund has ranged from more than $2,700 in 2016 to as high as $3,034 per check issued in 2014.

For some Americans, a fat refund check is a way of forcing themselves to save money for the future. The personal savings rate in the U.S. as of August 2016 was just 5.7%, meaning Americans are saving just half of what they were 50 years ago, and well below the personal savings rate of most developed countries. By overpaying on their federal taxes, most Americans are taking the out of sight, out of mind approach that allows them to build a foundation for their emergency savings or retirement.

RELATED: 10 things you've probably said while filing your taxes:

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10 things we've all said while filing our taxes
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10 things we've all said while filing our taxes

"It's only January, I have plenty of time!"
You're relaxed, you're casual, what even are taxes anyway? You don't care! It's so far away that filing taxes isn't even remotely on your radar, to be honest.

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"The imminent act of filing is upon me and I literally have nothing ready..."
Tax season is now approaching and that creeping anxiety about getting everything done on time is starting to set in. It's essentially biting at your heels and you know you have to get moving.

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No words. Just emotional paralysis.
You're screwed. You need to start doing your paperwork but you physically do not know where to even begin. It's time. It's happening.

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"I HAVE A MILLION THINGS I NEED TO DO, WHY ARE THERE SO MANY PAPERS AND QUESTIONS, SOMEBODY HELP ME!"
That anxiety you felt creeping in earlier? Now it's full-fledged onset. This stage is often accompanied by screaming out loud, pulling hair, crying, etc.

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"Wait, did I get all of my papers in? Did I check that one box correctly? Does it look like I'm trying to evade some of these taxes? What if I go to jail? Can I go to jail for that? WHO WILL FEED MY DOG WHEN I AM IN JAIL?!"

It's like handing in an exam in school and wishing you could grab it back and double check your answers one more time.

Who was that celebrity you heard about that went to jail for tax evasion? Because now you're convinced that's totally going to be you.

Spoiler alert: as long as you did everything to the best of your knowledge and ability, you probably won't go to jail. And even if you do, you'll find someone to walk your dog.

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"I got this, I'm almost done, a few more papers and I'm in the clear. I just have to pound through the rest of it. Go me!"

"Go you" is right! Now you're on cruise control and you're on track to get everything done well and on time. You're unstoppable in the delight of the world that is tax filing.

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"Thank god that's over with, now I can relax! What to do with all this stress-free free time!"
Finally, relief. Your papers are filed and sent out into the universe. It's off your back at last. Now on to more important things, like Netflix.

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"When is my return coming? Is this going to be my life for the rest of my life? Yep, it is. So about that return..."
Now, you wait. You want that money. And the inevitable truth that your life will now be a neverending cycle of filing taxes and waiting for your return.

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"SCORE my return was so much better than I expected! I'm buying a new dress. Or five. Probably five, why not?"
You're on a total life-high now. The possibilities of what you can spend your return on seem endless and even if you don't, having a nice bonus hunk of cash in your pocket feels pretty good. It made all of that stress completely worth it.

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"Honestly filing wasn't even that bad this year. And now I don't have to think about it anymore. Well at least not for another year. But no use in worrying about that now!"
Alas, acceptance. You know you'll fall victim to the vicious cycle again when next year rolls around. But truthfully, you wouldn't have it any other way. Okay, you obviously would. But you'll never change your procrastinating ways!

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However, as has been examined previously, getting a large refund check from the federal government isn't necessarily a good thing. A large refund check means you've allowed the federal government to hang onto money that should never have left your hands in the first place. What's more, the government gets to hang onto your cash on an interest-free basis. If you have debt that carries over from month to month, this extra cash could potentially have been put to better use.

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Image source: Getty Images.

If you get a big tax refund, it could be delayed in 2017

But, if you typically get a big refund and file your taxes as soon as possible to get your big payday, you'll want to be aware of new regulations in place that could delay when you'll get your refund check in the upcoming tax season.

The Internal Revenue Services' news feed isn't exactly "go-to information" for most Americans. Yet, in late August the IRS issued a press release urging taxpayers to review their tax withholding for the 2016 tax-filing season because new fraud-detection tools will be firmly in place and on a mission. That mission is aimed at significantly reducing tax fraud tied to the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC).

According to IRS estimates, between 21% and 26% of EITC claims are paid in error each year. In 2015, the IRS made $15.6 billion in erroneous EITC payments per the Treasury Inspector General for Tax Administration.

Specifically, the press release notes that while the IRS will begin accepting tax returns on-time in 2017, and it'll generally be sticking to its normal timeframe of issuing most refunds in 21 days or less, the newly passed Protecting Americans from Tax Hikes Act (PATH) requires the agency to hold a taxpayers' entire refund until at least mid-February if they're claiming the EITC or ACTC. Keep in mind, even if only a small portion of your refund comes from the EITC or ACTC, the IRS is still required by PATH to withhold your entire refund check. This extra withholding time should give the IRS an opportunity to more thoroughly review EITC and ACTC credits on a case-by-case basis in an effort to reduce fraudulent payments and identity theft. But for lower- and middle-class Americans counting on their refund, a surprise could await.

The recommendation from the IRS is to review your tax withholding status and alter it if need be, which can commonly be done with Form W-4. By altering your withholding status you can change how much, or how little, the federal government withholds from each paycheck. If you're expecting a large refund but you also know you qualify for either the EITC or ACTC, lowering your tax liability now to boost your paycheck for the remainder of the year could be a smart move since your refund will probably be delayed.

The IRS' press release also suggests that certain tax refunds that have nothing to do with the EITC or ACTC could be delayed based on its newly implemented screening tools, In other words, give strong consideration to adjusting your W-4 to collect more of your refund now rather than having to wait patiently to get a check from the federal government.

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Image source: Getty Images.

More reasons to consider reviewing your W-4

Refund delays aren't the only reason to consider adjusting your tax withholding, either. Big changes in your life can dramatically alter your effective tax rate, which may merit an adjustment to your W-4.

For example, getting married or divorced can have big tax implications. Married filers are privy to a number of tax breaks and deductions that single/divorced filers don't get. If you've recently been married or gotten divorced, you may want to consider adjusting your tax withholding to reflect your lower or higher tax responsibility.

Something similar could be said about purchasing a home. Buying a house or condo often comes with some juicy tax breaks that can include mortgage interest on your loan as well as mortgage points paid to obtain the loan. These fees could mean big deductions come tax time, which in turn could make it worthwhile for you to consider paying less in taxes to the federal government now and collecting a bigger payday until the end of the year.

Other considerations include having a baby, being unemployed for part of the year, and getting a second job, which can all affect your tax liability.

The threat of the IRS delaying refunds to millions of tax filers in 2017 just might be enough of an impetus to get working Americans to proactively adjust their tax withholding to put more money into their pocketbooks now rather than later.

The $15,834 Social Security bonus most retirees completely overlook

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