CAUGHT IN AN IRS SQUEEZE
Tax agency’s fraud, ID theft battle puts some neediest in a refund bind
WASHINGTON — The Internal Revenue Service’s battle against fraud and identity theft is intensifying as the tax-filing season opens, and some of the neediest taxpayers are getting caught in the middle.
The agency is barred from issuing refunds before Feb. 15 on any returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit. Congress mandated the delay to give the IRS more time to review returns to try to catch fraudulent ones before refunds are paid out.
In reality, taxpayers taking these credits will probably have to wait even longer to get their refunds — until the week of Feb. 27, the IRS says, because of weekends and the President’s Day holiday.
Dave DuVal, vice president of customer advocacy at TaxAudit.com, says the impact on these taxpayers could be tremendous. “They live paycheck to paycheck, and this is money they’re counting on,” he said.
Still, the attempt to reduce fraud “is a positive thing overall,” said Greg Rosica, tax partner at Ernst & Young.
Ric Eberle, an H&R Block office manager in Albuquerque, said the earned income tax credit has among the highest improper payment rates made by the IRS.
The delay “gives two weeks to the IRS to do more checking and due diligence on those returns,” Eberle said. “It won’t eradicate fraud entirely; it will alleviate it.”
In New Mexico, about 210,000 people claimed the earned income credit in 2016, with an average individual credit of $2,485. The average Advance Child Tax Credit payment was $1,311 last year among the 145,600 New Mexicans who claimed it.
The IRS will begin accepting returns on Monday, and tax experts recommend Americans continue to file their returns early, even with the refund delays.
“For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said in a statement.
This year’s filing deadline is Tuesday, April 18, since the traditional April 15 date falls on a Saturday, and D.C. Emancipation Day is observed on April 17.
Of course, taxpayers who need longer can request an extension. “Getting a filing extension avoids the late filing penalty, but it doesn’t avoid the late payment penalty,” said Barbara Weltman, a consultant and author of books on taxes, law and finance.
So the advice from tax experts: To avoid the late payment penalty, estimate the amount due and pay it before the April 18 filing deadline. But even with that, you won’t be able to avoid interest on payments made after the deadline.
Last year, the IRS processed more than 152 million returns. Electronic filing was up 2.4 percent, continuing a long-term trend. The average refund was
$2,860, up 2.3 percent or $63 from the previous year, the agency said.
For those who foresee financial hardship due to a delayed return, some tax-preparation companies are offering interest-free advance payments up to a certain amount.
H&R Block offers its clients up to $1,250, Eberle said.