The IRS website feature Where’s My Refund? is helpful because it tells taxpayers who filed their returns when they can expect an overpayment deposit or a refund check in the mail. The Internal Revenue Service typically grants refunds on e-filed returns within three weeks and on paper returns in six weeks, but this year, some people will be waiting longer than usual for a refund.
As we’ve described here previously, fraud is hardly uncommon in tax return filing, and the IRS is focused on reducing and weakening these schemes. One way that the Service is doing this is that they are holding certain refunds.
A common fraud works in such a way that a criminal files a return on someone else’s behalf and collects their refund. He or she does this by obtaining the Social Security Number and some other vital information of unsuspecting individuals, thereby gathering enough data to file a seemingly-legitimate return.
The fake filers can increase their refunds by claiming certain credits, such as the Earned Income Tax Credit or Additional Child Tax Credit. Consequently, lawmakers passed the PATH Act, which delays the refund of any taxpayer claiming the EITC or ACTC. Taxpayers claiming these credits will now not have their returns processed until Feb. 15, 2017, meaning that refunds may not arrive until the end of the month or later.
The rationale behind this provision of law is that the IRS will now have time to reconcile data between W-2s they receive and tax returns that are filed. They hope to unearth any inconsistencies and prevent the crooks for absconding with monies to which they have no right. Previously, the refund would be granted, and discrepancies would be addressed with a subsequent notice. Of course, if a fraudster has already gotten a refund, he or she is not going to pay the money back or even receive the notice that goes to the unsuspecting victim, so the old method was hardly an impediment to fraud.
Although the PATH Act will not eradicate fraud, it is certainly a step in the right direction. Of course, it may also open the doors to additional returns being delayed in future tax years. Until then, though, taxpayers filing a return that does not claim either of the two credits specifically mentioned should receive their refunds in the standard timeframe. The IRS reminds taxpayers that the most secure and efficient way to get a refund is by filing electronically and by choosing a direct deposit of refund.
By Dan Massey, CPA, Manager