Article Written by: Kevin McCoy, USA Today
Attention holiday shoppers: You might not be able to count on receiving a federal tax refund in January to pay for those gift bills.
In a congressionally-approved change aimed at battling tax refund fraud and identity theft, the IRS must hold tax refunds until Feb. 15 for the millions of Americans who claim the Earned Income Tax Credit or the Additional Child Tax Credit.
“We want people to be aware of the change for their planning purposes,” IRS Commissioner John Koskinen cautioned as the year-end giving season approached. “We don’t want anyone caught by surprise if they get their refund a few weeks later than in previous years.”
The Earned Income Tax Credit benefits taxpayers with low to moderate incomes. For a single head of household with two dependent children, the maximum annual income to qualify for the program in 2016 is $44,648, IRS data show. For married couples who file jointly and have two children, the threshold is $50,198.
The IRS will start accepting and processing 2016 federal tax returns once the filing season starts next month. Early filers who don’t claim the EITC or ACTC should receive refunds in less than 21 days after their returns are accepted for processing.
The new delay will give the IRS extra time to check 2016 filings for fraud, including identity theft, before refunds are mailed.
The IRS estimated 24% of all Earned Income Tax Credit payments in fiscal year 2013 (roughly $14.5 billion) were mistakenly paid.
Although some errors were unintentional, others involved filers who intentionally disregarded legal qualifications, the IRS says.
Similarly, the estimated improper payment rate for the Additional Child Tax Credit during fiscal year 2013 ran as high as 30.5%, or $7.1 billion, according to an IRS’ inspector general audit.
Some holiday shoppers won’t be able to count on January tax refunds to pay gift bills.
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