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Tax Tip Tuesday: This May Affect Your Return

A new federal tax law may affect some refunds filed in early 2017.

The IRS announced initial plans for processing tax returns involving the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) during the opening weeks of the 2017 filing season.

This action is due to the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) that was enacted December 18, 2015. It made several changes to the tax law to benefit taxpayers and their families.

This new law mandates that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before February 15th if the taxpayer claimed the EITC or ACTC on the return.

This change begins January 1, 2017. It may affect some returns filed early in 2017.

To comply with the law, the IRS will hold the refunds on the EITC and ACTC related returns until February 15th. This allows additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings. The IRS will hold the entire refund.

Under the new law, the IRS can't release the part of the refund that is not associated with the EITC or ACTC.

In light of these changes, taxpayers should still file as they normally do. Tax return preparers should not change how they submit returns. The IRS will begin accepting and processing tax returns once the filing season begins, as they do every year. That will not change.

The IRS still expects to issue most refunds in less than 21 days, though they will hold refunds for EITC and ACTC related tax returns filed early in 2017 until February 15th and then begin issuing them.

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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