In the NIPAs, advance refunds are treated as a "special factor"; they are considered early settlements for overwithheld
income tax payments that result from retroactive tax law changes.
But Amoco did not correct the overwithheld
amounts with the IRS except for filing an information return showing an overpayment of the tax.
One predominating factor has justified the release of modified tax withholding tables: under the old withholding system, millions of Americans were overwithheld
and ended up giving the government, in effect, an interest free loan annually.
(10) However, if a nonresident alien wants to obtain a refund of overwithheld
taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty, he or she must file a tax return even if, because of low taxable income, a return is not required.
However, taxpayers who itemize their deductions may be overwithheld
if they underestimate the number of additional withholding allowances that are necessary to offset the excess of their estimated itemized deductions over the standard deduction.(5) The second assumption is that each taxpayer's wages are constant throughout the year, so overwithholding may result if wages vary widely within the year and are therefore subject to varying withholding rates.
in response to concern about Rev.
These new tables compensate for the fact that millions of Americans are currently overwithheld
and end up giving the government an interest-free loan each year.