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?
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.
The government credits these programs 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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|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
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