2017 Tax Refund Delays

Life as a tax lawyer during refund season can become a little hectic, and this is especially true this year. Indeed, updates to the IRS tax code instigated a warning from the Internal Revenue Service that certain taxpayers may experience delays in receiving their 2017 tax refunds.

So where is the delay coming from? In 2015, Congress passed the “Protecting Americans from Tax Hikes (PATH) Act of 2015“, and the section of the law that focuses on refunds goes into effect this year. Consequently, the IRS must wait until February 15, 2017 to issue refunds to taxpayers who claimed either the earned-income tax credit (EITC) or the additional child tax credit (ACTC).

The ACTC and EITC are both refundable tax credits, meaning that if the amount of the claimed credit is larger than the amount of taxes you owe, you receive a refund. Even if you don’t have any tax obligation when you file, you can still get a tax refund by claiming these refundable credits.

In order to claim either the EITC or ACTC, you must have earned wages in the year your tax return is for. For tax purposes, these wages are usually reported on a form W-2 or form 1099-MISC, which employers are required to provide to taxpayers by January 31.

Employers used to be able to wait until the end of February if filing on paper, or the end of March if filing electronically, to submit these forms to the government. However, if taxpayers filed their returns early they would have done so before the IRS had even received those same forms from employers. The gap in time for reporting wage information has left open an opportunity for fraud, effectively giving scammers or identity thieves the chance to file phony tax returns before the IRS could catch on.

As part of the PATH Act, employers are now required to submit forms W-2 and 1099-MISC to the Social Security Administration on the same date that taxpayers receive their forms. By delaying the refund issue date to February 15, the IRS will be able to confirm accuracy of both the employer and taxpayer information. Additionally, the rise in identity theft has motivated the IRS and state tax authorities to establish extra fraud safeguards, which can result in additional review time. Despite potential delays, the new law’s requirements should overall mean more safe and accurate refund checks.

It’s important to note that for affected taxpayers, the IRS has to hold the entire refund, not just the portion associated with those credits, until at least February 15. Regardless, the IRS anticipates issuing most refunds in less than 21 days, which nearly any tax lawyer would agree is an expedient time frame.

If you would like more information on the status of your refund, check out the “Where’s My Refund?” tool available on IRS.gov. Taxpayers can check the status of their refunds within 24 hours after the IRS has received an electronically filed tax return or four weeks after mailing in a paper tax return.