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Tax refund delays: Not in time to pay for Christmas!

Tax refund delays should be expected this filing season. The IRS recently reminded tax filers who traditionally file early and expect early tax refunds that they can expect some tax refund delays this tax season. There are two obstacles (and there could be more by year end) blocking these early refunds which tax filers have depended upon to arrive within a 21-day refund period:

  • E-filing for 2016 returns will tentatively open the week of January 23, 2017, following the inauguration of Donald Trump as president. There could also be some last minute, end of the year changes to existing tax laws and extensions which could make employer and provider returns and reporting returns more cumbersome.
  • By utilizing changes buried deep within the Protecting Americans from Tax Hikes Act (PATH Act) of 2015, no refunds will be available before February 15, 2017, for returns claiming Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC).
What happened?

The IRS will attempt to prevent fraud and theft, which ran rampant among the nearly 26 million returns of low income tax filers last year. Low income returns claimed over $65 billion in credits for the tax year 2015; this year the IRS will allow itself more time to scrutinize these early, historically fraud- and theft-infested returns. The IRS’s goal is to ensure that all tax filers with legitimate credits receive their refunds as early as possible, and to detect any fraud and identify theft.

What else?

The IRS is planning new safeguards for the 2017 tax-filing seasons. To ensure authenticity of tax returns, the IRS has included 37 data elements that the tax-preparation industry will transmit to the IRS with each federal tax return filed by an individual. For the first time, the IRS will also require 32 data elements from business tax returns. This closer screening of all returns, not just those of low income tax filers, will mean some delay should be expected for all refunds.

Now what?

These tax refund delays for low income tax filers could mean that many families that are expecting large refunds, often amounting to thousands of dollars, will be hit the hardest. IRS Commissioner, John Koskinen, also cautioned those taxpayers who are used to getting an early refund that “We want people to be aware of the change for their planning purposes during the holidays. We don’t want anyone caught by surprise if they get their refund a few weeks later than in previous years.”

The IRS anticipates that after February 15, 2017, returns should be processed normally, with most refunds arriving within the usual 21-day refund period. As to whether all low income, early return direct deposit refunds are made on February 15 is unknown; however, many low income tax filers don’t have bank accounts and depend on checks. Processing of these checks could add further delays.

What’s the bottom line?

The IRS reminds us that these tax refund delays are industry-wide and that taxpayers shouldn’t postpone filing their taxes. File as early as possible.

This is not the year for do-it-yourself or big-box-store cube tax preparers. As the days to year-end and April 15 are counted down, there could be some late and totally unexpected tax changes. The IRS will be looking closely, and they already know where to find the most errors.

We’ll make your 2017 tax season as easy and stress-free as possible. We do taxes.

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