As many as 15 million taxpayers could have their refunds delayed until at least February 15 next year, according to an analysis tax officials.
The Protecting Americans from Tax Hikes (PATH) Act now requires the IRS to hold refunds for returns claiming the earned income tax credit (EITC) and additional child tax credit (ACTC) until February 15. Approximately 30 million taxpayers claim the EITC or ACTC, with half filing early.
“Taxpayers should file as they normally would, even if they expect their refund will be delayed,” said Kathy Pickering, executive director of The Tax Institute at H&R Block. “The IRS still expects to issue most refunds in less than 21 days, although the IRS will hold refunds for EITC and ACTC-related tax returns filed early in 2017 until February 15 and then begin issuing them.”
While the IRS will release those refunds on February15 many taxpayers may not see the funds deposit into their banking accounts for a few days afterward. This additional delay could be for many reasons and it is best for taxpayers to check the IRS’s Where’s My Refund website for any funding updates.
Delays helps the IRS combat tax identity fraud. The EITC received nationwide averaged approximately $2,500 per eligible taxpayer last year. While $65.6 billion was paid out last year, the IRS indicates that approximately one in five payments are made in error, either through fraudulent filing or confusion due to complexity in claiming the benefit. These credits are target rich for tax identity thieves and fraudsters. In fact, the EITC has one of the highest improper payment rates of the 16 “high-error” programs identified by the government.
Holding taxpayer refunds until February 15, along with the mandate that employers send employee W-2s to the IRS by January 31, allows the IRS additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings.
“It is important for taxpayers who claim these benefits to plan now for the delay,” Pickering said. “Visiting with a tax professional now can help them better understand the overall impact.”