According to the commissioner of the IRS, stolen identity refund fraud is a growing problem for the organization. Based on this issue, Congress approved a change that's designed to combat this type of fraud. However, fraudsters aren't the only ones who may be affected by the measure instituted by Congress. The significant change that this measure implements is requiring the IRS to hold refunds until February 15th for anyone who claims the Additional Child Tax Credit or Earned Income Tax Credit. As a result, people who are used to filing early and then getting their refund early may not have that experience in 2017.
While the IRS has acknowledged the impact this change will have on millions of legitimate taxpayers and has taken measures to help spread the word, the new policy has still caused plenty of frustration.
The Earned Income Tax Credit is designed to help families with low to moderate incomes. A single head of household with two children can qualify for this credit if they earned less than $44,648 in 2016 (the limit is $50,198 for a married couple filing jointly with the same number of children).
According to IRS statistics, more than twenty-six million filers have received the EITC. And in 2014, over twenty million filers claimed the Additional Child Tax Credit. As always, the IRS will accept and process federal tax returns for 2016 as soon as filing season begins. If someone files early and doesn't claim either of the credits discussed above, they can expect to receive their refund in less than twenty-one days after submitting their return.
But if a filer claims either of those credits, refunds will be held until February 15th. The purpose of this holding period is to give the IRS additional time to check for signs of fraudulent returns. Based on data from 2013, just under $15 billion of EITC payments were done in mistake. This accounts for nearly a fourth of all payments for this credit. Estimates from 2013 for the Additional Child Tax Credit peg the improper payment rate at over thirty percent.
If you want to avoid feeling stressed out this tax season and have the peace of mind that goes along with knowing that everything on your return was done correctly, be sure to take a look at how our tax preparation service can help.