According to a new change in tax law passed by Congress in December 2015, the IRS cannot issue refunds before February 15, 2017 for all tax returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). The IRS must hold the entire refund — not just the portion with the credits — until at least February 15. This change helps ensure that taxpayers get the refund they are owed by giving the agency more time to help detect and prevent fraud.
Many low and middle income families that are eligible for these tax credits rely on filing and receiving their refund as early as possible and often plan to address pressing financial needs with these refunds. Although information is widely available about the refund delay, many households may be surprised by this change which could make them more likely to turn to predatory lenders promising early refunds that are actually payday loans. As advocates, it’s important to spread the word of these changes so taxpayers are aware and can properly prepare, if necessary. Here are some facts and tips to help prepare taxpayers:
- Taxpayers should go ahead and file as soon as they have all of their tax information. There is no advantage to waiting until closer to February 15.
- The delay only applies to taxpayers eligible for EITC and/or additional CTC. Tax payers not receiving these credits will receive their refund within normal processing time frames.
- There are no exceptions. No paid tax preparer can get one of the affected refunds from IRS any faster. Tax payers should be wary of any paid preparer that claims the tax payer can access their refund before February 15
- Encourage tax payers to plan now for the delay. The Consumer Financial Protection Bureau has released a set of tools designed to help individuals, families, and tax preparers deal with dilemmas like mounting bills, responding to debt collectors and effectively planning a schedule to pay outstanding balances
- Taxpayers should NOT file without the EITC/ACTC just to get withholding back and then later file an amended return to get the credits. Filing an amended return requires additional tax preparation and can take months to process
- Encourage tax payers to avoid potential predatory preparers and complete their taxes for free through a Volunteer Income Tax Assistance (VITA) program. Households with incomes less that $54,000 in 2016 may be eligible and can call 516-505-4424 for more information or to schedule an appointment