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Taking These Deductions Could Delay Your 2016 Tax Refund

Photograph by Twenty20

If your family claims the earned income tax credit or the additional child tax credit, there’s a good chance your tax refund will be delayed this year.

A new law, designed to reduce fraudulent tax refunds, means the IRS will delay tax refunds for anyone claiming those credits to screen returns more thoroughly than in previous years.

Unfortunately, the delayed tax refunds will hit low-income families the hardest. These two deductions, designed to help the "working poor," are claimed by many families. Not everybody who you might think of as the picture of "working poor" is even eligible for these credits.

The IRS says it returned an estimated $3.1 billion in fraudulent tax refunds in 2014 (mostly to identity thieves) and $5.8 billion in 2013. If that seems like an obscene amount of money, it is. But for all the fraudulent returns they didn't catch, the IRS says it prevented close to $47 billion in fraudulent tax return payments from going out over those two years combined. Damn.

On the one hand, while it's good news that the IRS is taking extra measures to prevent identify theft and fraud, which costs taxpayers billions of dollars every year, this means that the people who rely most on their tax refund to pay bills won't get it as quickly as they usually do—which could put them in a tight spot. The IRS says more than 70 percent of taxpayers are expected to receive a refund on their return.

And, according to a report released by the National Taxpayer Advocate (part of an independent office of the IRS), the additional scrutiny on returns means legitimate refunds are also being delayed. Around 1.2 million legitimate refunds totally $9 billion were held up 30 days or more last year.

The earned income tax credit, often referred to as the EITC, is meant for low- to moderate-income working individuals and couples, especially those who have children. The amount of credit they receive are based on their income threshold and how many kids they have.

Most families are eligible for the standard child tax credit at the rate of $1,000 deducted per kid. But only low-income families are eligible for the additional child tax credit. Those families don't typically owe enough federal income tax to claim the full credit. The additional child tax credit helps low-income families that don't make enough money to reduce their federal tax liability to zero; however, it does not give them a refund if the amount of the credit is more than what brings them to zero liability. Some low-income families are eligible to get the rest of the credit as a tax refund if they meet certain criteria. According to the IRS, more than 20 million families received $27 billion in additional child tax credits in 2014.

You can begin filing your 2016 taxes on Jan. 23 and up until Tuesday, April 18. And if you're breastfeeding, don't forget you can take the breastfeeding tax deduction and check out our tips for tax season organization.

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