It’s early 2017 already, which means you may be just a few weeks away from receiving your favorite check of the year: your tax refund. But there have been rumblings recently about the refunds being delayed. Can you expect your 2017 refund to arrive late? In a word: maybe.
In 2015, a law was passed to prevent various cases of tax fraud around two common tax credits: the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). This law, called the Protect Americans from Tax Hikes (PATH) Act, includes the requirement for the IRS to take extra time to verify claims for these two credits starting this year. This law was passed in part because these two credits, more than other credits and deductions, were disproportionately inaccurate or erroneous. According to the New York Times, close to 25% of these claims are awarded mistakenly or fraudulently in any given year. The PATH Act hopes to reduce that percentage by giving the IRS more time to evaluate the claims.
So if you are planning on claiming either the EITC or the ACTC on your tax return this year, then yes, you will likely experience a delay in receiving your tax refund. The PATH Act requires the IRS to hold all EITC and ACTC refunds until February 15. The IRS has also reported that due to scheduling around weekends and President’s Day (February 20), the earliest they will likely be able to start sending out refunds will actually be February 27. Since the IRS begins processing returns on January 23, your refund delay will likely last about a month.
This is potentially bad news for many people, since the majority of those who claim the EITC and ACTC on their returns are low-income families who count on the relief of timely tax refunds soon after the first of the year. But the news isn’t all bad. For one thing, even if you plan to claim these credits, you can still file your return as early as you’d like, and that should put your refund closer to the head of the line in every other way. For another, since the IRS is taking a closer look at these claims to prevent mistakes, you’re basically getting a free double-check of your return. Guaranteeing accuracy now is a lot better than having to put together an audit defense later.
Most importantly, now that you know the delay is coming, you can plan for it. You may need to tighten your belt a bit more than you’d like to, but at least it won’t take you by surprise. And if neither of these credits apply to you (you don’t have children or don’t fall within the qualifying income bracket), your tax return should arrive on its normal schedule.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.