Taxpayers are already upset about their refunds being delayed. Delays are not discretionary and the decision is not controlled by the IRS and not all tax payers will be affected. A year ago Congress passed the “Protecting Americans fro Tax Hikes Act of 2015” this section focuses on refunds and kicked into gear this year. Under the new law, the IRS must wait until Feb 15, 2017 to issue refunds to taxpayers who claimed the earned income tax credit or the additional child tax credit.
Affected taxpayers should expect the IRS to hold their entire refund check, the delay is because both of these credits are refundable tax credits and can reduce your liability below zero. In other words you can get a tax credit even if you didn’t have any tax obligation and even if you didn’t pay any money into the system.
These type of tax credits make room for fraud. Scammers and thieves could in some instances file bogus returns weeks before the IRS had any chance to confirm wage earnings from W2 and 1099 tax forms. Now the forms have to be submitted and verified before refunds are issued. The IRS has time to match up the employer forms with the taxpayer forms and issue more accurate refunds. Before the early refunds were skewed towards taxpayers claiming these deductions.
The IRS still anticipates issuing more that 9 out of 10 refunds in less than 21 days.