Delayed Earned Income Tax Credit Refund in 2017

By | October 23, 2016

The earliest taxpayers can receive the 2016 earned income tax credit in 2017 will be on February 15. Taxpayers who claim the 2016 Earned Income Tax Credit or Additional Child Tax Credit early during tax season may not be receiving their refunds as early as they expect. The IRS has increased security around the issuance of earned income tax credit to protect the public from earned income tax credit fraud. At present, the IRS plans to hold the entire refund. Taxpayers and preparers should submit returns as they normally do, and the IRS will begin accepting and processing tax returns once filing season begins.


EITC Refund Delays

Most taxpayers who file should not be effected by these EITC delays, but many people claiming the EITC file their taxes in January when they receive their W2s. This means that the February deadline could be particularly important because many people might be used to receiving the refunds much earlier. Thus, it is important to not worry if there is a little more delay in receiving earned income tax credit benefits because this is a new planned policy.


When will you get 2016 tax refunds?

The IRS will begin releasing EITC and ACTC refunds starting Feb. 15. However, the IRS cautions taxpayers that these refunds likely won’t arrive in bank accounts or on debit cards until the week of Feb. 27 (assuming there are no processing issues with the tax return and the taxpayer chose direct deposit). This additional period is due to several factors, including banking and financial systems needing time to process deposits. After refunds leave the IRS, it takes additional time for them to be processed and for financial institutions to accept and deposit the refunds to bank accounts and products. The IRS reminds taxpayers many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving President’s Day may affect their refund timing.


Earned Income Tax Credit Refunds Delayed

Beginning in 2017, the IRS will hold refunds on EITC and ACTC returns until February 15. The delay results from the Protecting Americans from Tax Hikes Act of 2015 [PATH Act]. This law is intended to help prevent revenue lost due to identity theft and refund fraud.  Under this new law, the IRS cannot release the part of the refund that is not associated with EITC or ACTC. For years, the IRS has underestimated the risk of fraud involved with its EITC tax credit program, resulting in $13 – $15 billion in improper payments annually.


Additional Child Tax Credit Delays

Rampant fraud in the Additional Child Tax Credit program is another problem that the IRS has been trying to fix. Those claiming the additional child tax credit can also expect to face delays in receiving their refunds. The Additional Child Tax Credit is a $1,000 refundable credit designed to help low-income individuals reduce their tax burden. The IRS says it is provided to qualifying individuals even if no income tax is withheld or paid, meaning the credit can exceed the tax liability. The IRS began taking steps in late fiscal year 2015 to improve the risk assessment process for the refundable tax credits. As part of that effort, we are continuing to evaluate the risk assessments and identify opportunities to make them more robust.


When do you get EITC money in 2017?

Even if you file your taxes once the tax season begins, you will not be able to receive from the earned income tax credit before February 15. It is still advantageous to file early because this will ensure that you get your funds as soon as possible. This is intended to give the IRS more time to help detect and prevent fraud. As you might imagine, the IRS faces a lot of fraud attempts. In fact, tax time is a great time for scammers to try and commit fraud. The IRS still expects to issue most refunds in less than 21 days


EITC Fraud

This new  delay in receiving EITC results from people defrauding the EITc progam. The IRS estimates that between 21 percent to 26 percent of EITC claims are paid in error. Some of the errors are unintentional caused by the complexity of the law, but some of the claims are intentional disregard of the law. The 2016 tax season is the first uear in which the IRS has taken additional steps to prevent EITC fraud by delaying tax refunds from people who claim the EITC.

IRS has a Return Preparer Strategy that includes outreach and compliance activities. Outreach includes educational materials to ensure preparers have complete and current information about EITC eligibility, filing requirements and their EITC due diligence requirements.

The IRS has launched initiatives since 2010 to reduce EITC errors. Since the current estimate of the EITC error rate is based on IRS analysis of data from tax year 2010, the error rate could be modestly lower now.


What is the EITC?

The earned income tax credit or earned income credit(EITC or EIC) is a refundable tax credit for low- to moderate-income working individuals and couples. Families with children will receive extra benefits. The amount of EITC benefit depends on a recipient’s income and number of children. More information on the 2016 EITC and the 2017 EITC. A low-income worker can receive refundable tax credits from the Earned Income Tax Credit program when they meet certain requirements for income and age.