Bah Humbug! Tax Refund Delays Expected
As the holiday season nears an end, many of us dread the impending tax season that follows on its heels. At least some taxpayers can look forward to receiving their refund from the IRS. Money is generally good motivation to file early. Unfortunately, the upcoming tax season may be plagued by delays, and many could have to wait longer than accustomed for their tax refunds in 2017.[1] There are two primary culprits: First, a new law, the Protecting Americans from Tax Hikes (PATH) Act, requires the IRS to hold refunds until mid-February for those claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). To allow for more time for the agency to detect and prevent fraud, the new law requires the IRS to hold the entire refund--even the portion not associated with these credits--until at least February 15. In addition, it will take several days for these refunds to be released and processed through financial institutions once the funds leave the IRS. Factoring in weekends and the President’s Day holiday, the IRS cautions that many affected taxpayers may not have actual access to their refunds until the week of February 27 at earliest. In short, taxpayers claiming these tax credits, and perhaps other credits as well, should expect a longer wait for refunds despite filing early.
Second, some tax returns and refunds will receive additional review related to identity theft and refund fraud safeguards put in place both by states and the IRS. In other words, some legitimate refunds will get delayed during the review process as the IRS attempts to combat identify theft and tax refund fraud through many processing filters. The IRS along with state tax agencies and industry partners[2] are finalizing plans on how to improve theft protections in 2017 for both individual and business taxpayers, and additional safeguards will be set in place for the upcoming 2017 filing season, which will cause processing delays. Thanks a lot, identity thieves.
While it is uncertain how long taxpayers may have to wait for a refund regardless of their claimed tax credits and other filings, the IRS remains confident its ultimate processing time once a refund is accepted will remain the same as in past years. According to the IRS, “most refunds will be issued within the normal timeframe: less than 21 days, after being accepted for processing by the IRS.”[3] [4]
Needless to say—thanks to cybercriminals and other miscreants the need for vigilant fraud detection and prevention has never been greater. As a result, some taxpayers must say goodbye to early refunds. Those who look forward to their funds, especially after holiday spending, will just have to wait and see the severity of delay.[5] [6]
—By Keobopha Keopong, Esq., Barnes Law
Keo Keopong is an associate attorney with Barnes Law, licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] “As Holidays Approach, IRS Reminds Taxpayers of Refund Delays in 2017.” IR-2016-152, Nov. 22, 2016; On December 9, 2016, the IRS announced that the nation’s tax season will begin Monday, Jan. 23, 2017, and reminded taxpayers claiming certain tax credits to expect a longer wait for refunds. IR-2016-167, Dec. 9, 2016.
[2] “The IRS and its partners saw a marked improvement in the battle against identity theft in 2016. This is highlighted by the number of new people reporting stolen identities on federal tax returns falling by more than 50 percent, with nearly 275,000 fewer victims compared to a year ago.” IR-2016-152, Nov. 22, 2016.
[3] “‘These increased security screenings are invisible to most taxpayers,’ Koskinen said. ‘But we want people to be aware we are taking additional steps to protect taxpayers from identity theft, and that sometimes means the real taxpayers face a slight delay in their refunds.’” IR-2016-152, Nov. 22, 2016.
[4] “Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days, but there are some important factors to keep in mind for taxpayers.”IR-2016-167, Dec. 9, 2016.
[5] For more steps planned for the 2017 tax season, see Security Summit.
[6] Sources for the information contained herein: IR-2016-152, Nov. 22, 2016; and IR-2016-167, Dec. 9, 2016.