WASHINGTON (Reuters) - The budget deficit shrank by nearly half in January compared to a year earlier as tax collections from individuals rose and outlays fell, the Congressional Budget Office said on Tuesday.

The CBO said it expects the Treasury Department to report a $27 billion deficit for January, versus a $50 billion deficit in January 2011.

The January budget gap will bring the total deficit for the first four months of fiscal 2012 to $349 billion, a decrease of about $70 billion from the same period of fiscal 2011.

The CBO last week predicted that the United States would rack up a $1-trillion-plus deficit for a fourth straight year, forecasting a $1.08 trillion gap for fiscal 2012, which ends on September 30. The fiscal 2011 U.S. deficit was $1.3 trillion.

January U.S. receipts were up about $9 billion, or 4 percent from a year earlier, largely because of higher withholdings of individual income and payroll taxes, CBO said.

Outlays were $13 billion, or 5 percent, lower in January 2012 than they were a year earlier. But because of the New Year's holiday, some benefit payments were shifted into December, reducing outlays during the month.

Were it not for these timing changes, the January deficit would have been slightly higher at about $31 billion, CBO said.

The Treasury is expected to report official January budget details on Friday.

(Reporting By David Lawder; Editing by Chizu Nomiyama)