New Federal Tax Law May Affect Some Refunds Filed in Early 2017

Last year, the IRS announced plans that may affect how some tax returns are processed during the start of 2017. Since this announcement may impact how your return is processed in the very near future, we want to cover all the relevant information you need to know.

The tax returns in question are those that involve the Additional Child Tax Credit and Earned Income Tax Credit. The reason that some early filers may be affected by this change has to do with the PATH Act. Protecting Americans from Tax Hikes Act of 2015 went into effect on December 18th of 2015. The purpose of this act is to help taxpayers and their families.

One of the changes the PATH Act put into place was a new law which mandates that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before February 15th if the taxpayer claims the Additional Child Tax Credit or Earned Income Tax Credit on their return.

 

What These Changes Mean for You

If you’re not claiming either of these credits, this specific change won’t have an impact on your filing or any refunds you receive. However, this law does demonstrate the frequently changing nature of the US tax code, which is why it’s always helpful to have a knowledgeable tax professional on your side.

For anyone who did claim either credit and filed their return, you should be aware of a few additional details. First, the IRS will hold refunds related to the ACTC and EITC until the 15th of February. This is being done to comply with the new federal law. The purpose of this additional time is to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings.

One question that has come up about this issue is whether or not the IRS will hold an entire refund. The answer to that question is they will. As the IRS explained in one of their official releases on this topic, the new law does not allow them to release part of the refund despite not being related to the ACTC or EITC.

Another topic worth clarifying is this shouldn’t cause anyone to change their filing schedule. The IRS will start accepting returns on January 23rd (you can submit your returns to a tax professional before this date and then they will send it in as soon as the IRS window opens). And the IRS has also made it clear that they still expect to issue the majority of refunds in under 21 days.

If you have any other questions about this issue or other topics related to your tax filing, Donohoo Accounting Services is here to help. You can get a free consultation about our tax services by calling 513-528-3982.