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PATH Act Provision Delays Some Tax Refunds in 2017

Jun 15th 2016
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Tax legislation passed at the end of last year requires the IRS to hold refunds until mid-February for all taxpayers who claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) on their returns, the tax agency reminded practitioners on June 9.

The reason? The delay gives the IRS extra time “to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings,” the agency said in a statement.

“The IRS is sharing the information now to help the tax community prepare for the 2017 season, and plans are being made for a wider communication effort this summer and fall to alert taxpayers about the changes that will affect some early filers,” the statement continued.

Under Section 201 of the Protecting Americans from Tax Hikes (PATH) Act of 2015, the wide-ranging law that made many popular tax breaks permanent while extending others for a period of two or five years, refunds that include the EITC and/or the ACTC cannot be released before Feb. 15.

This change begins Jan. 1, 2017.

Four other key points the IRS reiterated:

  • The entire refund has to be held until Feb. 15. Under the new law, the IRS is not allowed to release the part of the refund that is not associated with the EITC and/or the ACTC.
  • Taxpayers should file, and tax return preparers should submit returns, as they normally do.
  • Per usual, the IRS will begin accepting and processing tax returns once the 2017 filing season begins.
  • Despite the refund hold for EITC- and ACTC-related returns, the IRS still expects to issue most refunds in less than 21 days.

“This is one more step the IRS is taking to ensure taxpayers receive the refund they are owed,” the statement said. “The IRS plans to work closely with stakeholders and IRS partners to help the public understand this process before they file their tax returns and ensure a smooth transition for this important law change.”