Every year, the IRS usually offers quick turnaround times for tax refunds, especially for those who file early. If you’re expecting this for 2017, you may be disappointed.
New provisions have been passed as law by Protecting Americans. The law, passed last December, will be known as the Tax Hikes Act of 2015 and pushes back refunds for people who claim Earned Income Credits or Additional Tax Credits until mid-February, at the earliest.
Defending People Against Tax Credit Fraud
The Earned Income Tax Credit (“ETC”) and Additional Tax Credit (“ATC”) are known to be “refundable” taxes.
Essentially, this means that these credits apply directly against any taxes you owe and push people up in tax credits allowed.
Many lawmakers have been arguing that these credits are often abused in the IRS system. Billions of dollars every year are fraudulently refunded because of improper EITC and ATC claims. To combat this fraud, multiple bills have been brought to the attention of Congress in recent years to help heighten the security of these credits.
Many supporters of the two credits believe that the system is being abused by fraudsters looking to gain more money. These credits are applied to lower-income taxpayers and many say they believe that the system is also over-abused because of the complexity of them. Adding these tax credits should help people who rely on them and not add even more obstacles.
However, the compromise with the PATH Act seems to be a good place for these refundable credits.
The new law allows the issuance of refunds to be delayed so the IRS will have additional time to review each form and verify the claim is accurate and legitimate. The PATH Act supports this and the IRS says that the delay should help with reducing how much the U.S. Treasures loses every year in lieu of the fraudulent credit claims based on fabricated wages and withholdings.
The System is Still Available to You, Just Later
Typically, beginning the third week of January, the annual tax-filing season will still be available to everyone. Those who are not filing the credit will not experience delays. However, the IRS says that even with this enhanced security procedure, they still expect to get your refunds out in less than 21 days.
The IRS recommends having your refund filed electronically and directed debited to your bank account for quicker processing times.
For example, if you e-file on January 23, expect your refund to be directly debited to you around February 23.
However, if you file for EITC or ATC, expect the direct debit to come March 1 (traditionally 8-day refund time delays).
Planning for Your Tax Money Now
It’s important to plan accordingly for your 2017 taxes.
Consider adjustments to your payroll withholdings now to ensure you get what you expect back in refunds this year over six-months versus waiting until February to get your refund.