The IRS announced this week that certain taxpayers may have their federal tax refunds delayed. This change may impact certain 2016 refunds for tax returns filed in 2017. Due to the Protecting Americans from Tax Hikes Act of 2015, also known as the PATH Act, which was signed into law on December 18, 2015, taxpayers who claim the Earned Income Credit (EIC) or Additional Child Tax Credit (ACTC) on an income tax return will not receive their refund until after February 15. The PATH Act of 2015 has a provision which indicates that no credit or refund of an overpayment on a tax return with EIC or ACTC shall be made to a taxpayer prior to February 15. This change is effective January 1, 2017.

One of the reasons for this change is that it allows additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings. Please note that the IRS still wants taxpayers to file their tax returns as they would in prior years. There is no need to wait to file your tax return if you have EIC or ACTC. The IRS will still accept and process the tax return prior to February 15; however, it will hold refunds of EIC or ACTC until February 15.

Also note that the IRS will not issue partial refunds. For example, if you have a refund that is partially due to EIC and partially from withholding, the entire refund will be held until February 15. The IRS can’t early release the part of the refund that is not EIC or ACTC. The IRS still expects to issue most refunds in less than 21 days. If you sign up for direct deposit, your refund typically arrives sooner than 21 days. More information about this tax law change will be posted to IRS.gov during 2016.

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Curt Bach
I joined Hawkins Ash CPAs in August 2010, and am currently a manager in the firm’s Medford office. I provide a variety of tax services, including trust and estate tax preparation and planning. I have more than nine years of experience providing audit and tax services to nonprofit organizations, governmental entities and small businesses. I am a member of our firm’s tax committee and not-for-profit service group.

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