New Law Could Delay IRS Tax Refunds for 3 Million

IRS tax refund

The tax season is officially underway, with the IRS accepting returns as of January 23. Millions of people submit their taxes in hopes of getting a refund, which can be the biggest windfall they receive all year. But this year, your IRS tax refund could be delayed, making you wait for weeks to get your money.

Below, find out what the holdup is and who is affected.

Why is there an IRS refund delay?

The government passed a new law that requires the IRS to hold refunds that claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC).

Both tax credits are a big deal for low or moderate-income families. With EITC, families can get as much as $6,269 deposited into their bank accounts. And with ACTC, families can get a credit of up to $1,000 per child. These credits can help working families pay for necessary expenses, build an emergency fund, or save for the children’s education.

About 27.5 million people receive EITC benefits each year, and the government credits the program with lifting 9.4 million people out of poverty. In 2014, about 20 million families claimed the ACTC credit, bringing in a total of $27 billion in refunds.

However, because the tax credits are so valuable, there have been many cases of fraud. The Treasury Department has dubbed both EITC and ACTC programs as high-risk. In fact, the IRS estimates that 22 to 26 percent of EITC were issued improperly, costing billions of dollars.

Because of these issues, new rules were put in place to allow for more processing time and review to rule out fraudulent and incorrect claims. The new law could affect as many as 3 million people and delay up to $50 billion in refunds.

When can I expect my tax refund?

If you claim either credit and file your taxes, your IRS tax refund could be delayed up to a month. The earliest the IRS will begin issuing refunds is February 15, but the IRS says you might not actually see those funds until February 27. And if you rely on the “Where’s my refund” tool on the IRS website, you may not be able to track your refund until mid-February.

For many families, this is a huge imposition. Some people count on their tax refund to handle big expenses and plan accordingly, scheduling medical appointments or much-needed home repairs around their expected refund. Because of the expected delays, they may have to postpone necessary procedures or find another way to pay, such as using a credit card.

And that means more people will turn to other measures to make ends meet. Some tax preparers are offering tax refund loans. Others offer a fraction of the refund and keep the rest for themselves. Desperate customers may go this route, and lose out on hundreds or even thousands of dollars, just to get their hands on some extra money quickly.

Is it worth postponing doing your taxes?

While it may seem like it’s not worth it to do your taxes since there’s a delay, experts still recommend proceeding with your taxes as soon as possible.

“For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said in a statement. “People should make sure they have their year-end tax statements in hand, and we encourage people to file as they normally would, including those claiming the credits affected by the refund delay.”

While refunds may be delayed, the IRS says that most returns will be reviewed and refunds issued within 21 days.

Filing your taxes early on in the tax season can ensure a scammer cannot file a tax return in your name, and it ensures you get your refund as soon as they become available.

Other tax changes

The new law around EITC and ACTC is not the only change for the 2016 tax year.

This year, the deadline to file your taxes is slightly extended. April 15 falls on a Saturday and Emancipation Day, a legal holiday in the District of Columbia, is on the next Monday, so the tax deadline was pushed back to Tuesday.

There are also new changes to what you need to file your taxes. If you choose to use tax filing software like TurboTax for the first time, you’ll need a copy of last year’s tax return before you can proceed. As part of an initiative to cut down on identity theft, users will have to prove their identity by entering their adjusted gross income (AGI) from the year before.

Filing your taxes

While there may be delays with your IRS tax refund, it’s a good idea to start working on your taxes and file them early on in the tax season. It will help reduce the risk of fraud and get you the money you deserve as soon as possible.

For more information about taxes, check out this article on four common tax scams.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

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SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
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5.25% - 14.24%$2,000 - $50,000Visit Earnest
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