If you’re used to getting your tax refund early – say, early January – and you claim the Earned Income Tax Credit or Additional Child Tax Credit, the Internal Revenue Service wants you to know that your refund is coming a little later this year.

According to the nation’s favorite agency, new laws designed to cut down on the number of fraudulent returns require the IRS to hold refunds claiming either of those two credits until at least February 15. 

Is fraud really such a big problem that holding people’s refunds is necessary? According to IRS statistics, yes. The IRS estimates that 24% of all Earned Income Tax Credit payments in the 2013 fiscal year were paid by mistake. That’s $14.5 billion! The Additional Child Tax Credit for the same period account for $7.1 billion – 30.5% of all payments. 

Not all of these payments were actual fraud. Some were mistaken payments because the qualifications for these credits are complicated. All the same, the IRS, in partnership with the tax-preparation industry, aims to drastically cut the rate of inaccurate or fraudulent returns.

Fighting Fraud

For the 2016 filing season, the tax preparation industry will transmit 37 additional data elements with each individual tax return and 32 additional data elements with business tax returns. These extra data points will help the IRS better identify problems before sending refunds, but it may cause slight delays to all taxpayers. 

All this is part of a larger effort to combat fraud. In 2016, the number of people reporting identity theft on federal tax returns decreased by 50%. That’s nearly 275,000 fewer victims. 

The Bottom Line

The IRS points out that most people won’t be affected by the change. As always, most taxpayers can expect their refund within 21 days of filing. Those filing in January and claiming one of those two credits should be prepared to wait a little bit longer. For more, see Income-Tax Identity Theft: How to Fight Back and How to Safeguard Your Tax Returns from Identity Theft.



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