Tax Refunds Are Going To Be Delayed for Filers Claiming These Tax Credits

A stock photo shows income tax forms, receipts and a sharpened pencil.
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What to Know

  • Early filers who claim the earned income tax credit or the additional child tax credit may not get their money until the first week of March.
  • Due to an anti-fraud law, the IRS cannot issue these refunds before mid-February.
  • About 275,000 taxpayers had their payments delayed last year due to a new fraud filter.

Millions of households that hustled to get their tax returns to the IRS early could be waiting until March for their refunds.

If you’re claiming the additional child tax credit or the earned income tax credit, the IRS cannot issue your refund before mid-February. An anti-fraud law requires the agency to use that additional time to review those returns in an effort to prevent refunds from being issued to scammers.

That means these families could be waiting until the first week of March before their refund hits their bank accounts.

Last year, more than 19.2 million tax returns claimed the additional child tax credit, while nearly 25 million returns took the earned income tax credit, according to IRS data through July 25, 2019.

Heading off fraud can come at a steep cost.

Last year, the IRS debuted a new fraud algorithm — Filter X — which suspended about 1.1 million returns through Sept. 26 because they claimed the earned income tax credit, the additional child tax credit or had incomplete wage and withholding information.

Approximately 275,000 of these returns were held for more than 40 days, according to a report from the Taxpayer Advocate Service, an internal watchdog for the IRS.

“The tension between preventing fraud and expediting refunds has been a constant, especially in the earned income tax credit program, for many years,” said Pete Sepp, president of the National Taxpayers Union.

Low income hit hardest

Delayed refunds may keep cash out of the hands of people who need it most.

Indeed, taxpayers claiming the earned income and the additional child tax credits tend to be lower income.

For example, in 2020, a married couple with two kids must have an adjusted gross income of no more than $53,330 in order to claim the earned income tax credit.

Meanwhile, the additional child tax credit is the refundable portion of the $2,000 child tax credit. It’s worth up to $1,400.

Filers who got money back from Uncle Sam last year received an average of $2,860, the IRS found.

Refunds often go toward paying surprise medical bills and lowering credit card balances.

“If refunds for lower-income people are being held up as an enforcement matter, that’s not even where the revenue savings are,” said Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Policy.

Gearing up

The IRS plans on improving its track record for 2020 by checking daily — not weekly — for third-party data from employers and other parties to match the information on filers’ returns, the Taxpayer Advocate found.

Being proactive still helps.

Get your data. The simpler your return is, the easier it will be to round up your reporting forms. By now, Form W-2 from your employer should be in your possession.

Don’t procrastinate. Scammers filing phony returns can get the first crack at your tax refund. Beat them to the punch, and file as early as possible.

Where’s the money? Most refunds are issued within 21 days. Track your refund as early as 24 hours after you e-file.

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