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Refunds for Certain Credits Delayed Next Filing Season

If you expect to claim either the Earned Income Credit or Additional Child Credit on your 2016 tax return, prepare for the possibility that you may need to wait for that refund longer than usual. In an effort to curb fraudulent refunds due to identity theft and fabricated tax returns, the IRS is mandating that no refund shall be issued prior to February 15, 2017 if the return contains either of the credits listed above.

The Earned Income Credit and Additional Child Credit have long been areas of heavy abuse for fraudsters, which has prompted the IRS to crack down in recent years. The more recent epidemic of taxpayer identity theft has further pressured the IRS to take control of these issues. The majority of fraudulent returns are filed early in the tax season, in order for the criminals to beat the actual taxpayer to the punch. This additional time for processing will allow the IRS to more closely examine these early returns, and hopefully cut down on the issuance of fraudulent refunds while also protecting the tax records of legitimate taxpayers.

The new policy stems from the PATH Act (Protecting Americans from Tax Hikes), which was passed in December of 2015. The Act mandates that no refund due to the Earned Income Credit or Additional Child Credit be issued prior to February 15 of the filing season. The theory behind the PATH Act is that fraudulent refunds and other lost revenue sustained by the IRS has the potential to trigger tax increases in order to make up for those losses.

Further information on refund issuance restrictions is expected later in the year, but currently the IRS advises taxpayers to plan on filing their returns as usual come next filing season.

By Austin Bradley, CPA