Where’s my refund?
The tax refunds of many low-income taxpayers will be delayed. Find out why.
Q: I understand the tax refunds of many low-income taxpayers will be delayed. Is this true, and if so, why?
A: Unfortunately it is. In 2015 Congress enacted a law, which took effect for tax year 2016. The act makes the Internal Revenue Service (IRS) delay certain refunds to have more time to screen returns for fraud.
Q: Why was this act passed?
A: It is a comprehensive tax change titled “Protecting Americans from Tax Hikes (PATH) Act. It was designed not only to protect tax payers but also to help combat fraud.
Q: How many people will have delayed refunds and why is it the low income who are disproportionately hit by this new law?
A: There will be an estimated 40 million working poor families that will be impacted by this. The reason the lower income will be hit the hardest is because of refundable credits. Most middle-class and upper middle-class taxpayers make too much money to qualify for these credits. Over the years, these credits have been the target of multiple tax and identify theft scams that have resulted in billions of erroneous tax refunds being issued.
Q: What credits are the target of the new PATH Act?
A: The Earned Income Tax Credit, The American Opportunity Credit and The Additional Child Tax Credit. Basically all who have these three credits on their returns will have their refunds delayed.
Q: How long will the delay be?
A: Tax filing season starts on Jan. 23. In years past, taxpayers typically would see their refunds, if they used direct deposit, in 10 to 21 days from the date they e-filed their returns. This year, the IRS will not process any of the above returns until Feb. 15, and they won’t release refunds until the week of Feb. 27.
Q: Do the delayed refunds represent much money?
A: Depending on the number of dependents and how low the income, refunds can be upward of $10,000 for some families.