There is a say thing that the only two things that are inevitable are death and taxes. To that end in 2014, the Internal Revenue Service (IRS) processed 240 million individual tax returns. That year, it collected approximately $3.1 trillion in taxes. Many of the people who filed did get refunds. Many people factor in the refunds they are expecting to receive when they are planning for things like holiday shopping.
USA Todayandnbsp;is reporting that many early refunds are going to be sent out later than expected by the IRS. Normally, the refunds are professed in January, which works well for many who use that money to pay for heir holiday gifts. This year, however, the agency has been instructed by Congress to hold off until February 15 to process the refunds. It has been said that the move was initiated to prevent and control both identity theft and tax refund fraud. The people impacted are those who can take advantage of the Additional Child Tax Credit or the Earned Income Tax Credit.
IRS Commissioner John Koskinen said, “This is an important change as some of these taxpayers are used to getting an early refund. We want people to be aware of the change for their planning purposes during the holidays. We don’t want anyone caught by surprise if they get their refund a few weeks later than in previous years.” He added that the new anti-fraud efforts will mean that, “sometimes means the real taxpayers face a slight delay in their refunds.”
Low to moderate income families depend upon the Earned Income Tax Credit. The maximum income that can be earned, for a household with one primary wage earner and and two children who are dependents, is $44.648, according to the IRS. That number climbs to $50,198 for married couples who file together and have two children. This is the data from 2016.
The IRS says that as of June nearly 26 million Americans were eligible for the Earned Income Tax Credit. In terms of the Additional Child Tax Credit, more than 20 million people filed for that credit in 2014. That is the most recent data available for this tax credit.
The tac season begins in January and will start taking in and processing the returns for 2016. For the people who do not take advantage of the Additional Child Tax Credit or the Earned Income Tax Credit, refunds should be expected in about three weeks from the date that their returns are received.
The IRS will have more time to look into cases of fraud, which include tax refund fraud and identity theft before they send out payments. In 2013, the IRS estimates that nearly 24% of all payments for the Earned Income Tax Credit were made by mistake. That amounted to about $14.5 billion. While there were some errors due to the complicated nature of the tax credit filing process, other people filed for it even though they knew they no longer qualified for it. The Additional Child Tax Credit was also the target for fraud. In 2013, 30.5% of the payments for the tax credit went out to people who were no longer eligible for it. That translated to $7.1 billion, says the Office of the Inspector General at the IRS.
In November, the IRS announced that is was working with tax services professionals, accounting experts, certified public accountants (CPAs) and bookkeepers to prevent identity theft and tax refund fraud. These efforts results in them preventing millions of dollars of payments from going out in cases of attempted fraud.
The IRS plans to put in place new measures to make sure the tax returns it receives for fiscal year 2016 are authentic. The tax preparation industry plans to include at 37 new kinds of data in the tax returns that it sends to the agency. Individuals who file their own taxes will also need to follow the new rules. There are 32 new pieces of data that businesses will be required to supply the IRS with when they file their returns.
This is a good reminder that tax season is just around the corner.