Prepare yourselves! In the next couple of months, you are going to start hearing more and more “tax talk.” Discussions about making sure that you start organizing and gathering all necessary documents and paperwork, pleas for why you should start the filing process as soon as possible so as not to miss the deadline, the list goes on and on.
But it seems as if there is already some talk that has been making its way through the grapevine, even though it is only January. And it’s about your tax refunds.
Most taxpayers excitedly await their refund checks in the mail every year, but the Internal Revenue Service (IRS) is warning everyone that they might have to wait a little longer before celebrating their reimbursement this year.
There are a few reasons for this. And while this predicted wait may be disheartening to many, it is for your benefit.
A New Law Takes Effect
Starting this year, taxpayers who are eligible and claim the Earned Income Tax Credit (EITC) and/or the Additional Child Tax Credit (ACTC) on their 2016 returns are the ones who this delay will affect. The IRS stresses that this delay won’t be ludicrous and are adamant that most refunds will be issued within the normal 21 day waiting period that they already give citizens.
Their warning is more pertinent for the people who file early and, as a result, typically get their refunds a few weeks before everyone else. However, there were some cases last year where it took up to 18 weeks for some individuals to receive their full refunds.
Why the delay?
You can thank the scam artists for this new law that was put into effect. Because of these two credits, which are fully refundable, the IRS has seen a spike in attempted fraud. This new law regulates that they hold the refunds of people who claim the EITC or ACTC until mid-February so that the agency has adequate time to detect and prevent fraud before distributing the money. Unfortunately, this attempt to combat fraud and increase security means that you will have to face a minor delay.
But what if you don’t want to wait for your tax refund?
There is a solution that will help you avoid this potential delay, but it involves making a change on your taxes. If you modify your tax withholding for the year, you will receive more money throughout the year in your paychecks, but it means that you won’t pocket as much of a sum when you get your tax refund back. This is entirely up to your discretion, of course. If you would rather have more money withheld throughout the year because you look forward to a larger refund, than the IRS just wants to remind you not to be shocked or disgruntled if it takes a few more weeks.
Whether you have heard this news yet or not, I hope this helps to explain the methods being put into place to help fight back against scam artists and identity fraud and how these changes may affect you personally.