Some tax refunds that include an Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) will be held until February 15.
WHY IS THE DELAY HAPPENING?
On December 18, 2015, Congress passed the PATH (Protecting Americans from Tax Hikes) Act which made over 20 tax provisions permanent, including tax credit expansions to the EITC, ACTC, and American Opportunity Tax Credit (AOTC) that were set to expire in 2017. The PATH Act also requires a change in the issuing of EITC and ACTC refunds.
No refund will be made to a taxpayer before February 15 if the taxpayer claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return. This will allow the IRS to verify income reported on those returns since employers are now required to file W-2 forms and 1099s by January 31 (previously they had until March). If a taxpayer only claims the 2021 expanded CTC and not the EITC, the refund is not required to be held until February 15. However, there may still be delays in receiving refunds based on IRS processing.
Most refunds are expected to be issued within 21 days of processing. If the IRS identifies significant mismatches between the income information provided on the return and provided by employers, there can be additional delays as the IRS seeks to resolve the mismatch.
WHAT DO VITA CLIENTS NEED TO KNOW?
- File as you normally do. You do not need to change the way you file your tax return, including where you get your taxes done.
- The delay applies to all methods of tax filing – at a VITA site, by a commercial tax preparer, or self-preparation. No one can provide your refund before February 15. There are no exceptions.
- The purpose of the refund delay is to help protect you and your refund.
- Beware of offers of loans against delayed refunds, such as a loan on a refund claim based on a year-end paystub instead of a W-2. Loan fees are expensive and the return may be inaccurate without all income information, but the loan must be repaid.
- While the delay applies specifically to tax filers claiming the EITC and ACTC, it will affect your entire refund, including refunds based on over withholding or other tax credits. You cannot receive a partial refund.
- Everyone is not affected by the delay. Taxpayers claiming the EITC and ACTC who file returns after February 15 will not be impacted. Additionally, early filers who are ineligible to claim the EITC or ACTC will not be affected. Refunds based only on over withholding or other tax credits will not be held.
HOW CAN YOU HELP CLIENTS PREPARE FOR POTENTIAL REFUND DELAYS?
Before Tax Season
- VITA sites can notify previous clients about the delay and remind clients that your organization is a trusted source for tax filing.
- Train staff in your organization and other program partners about potential refund delays so they can inform clients receiving other services.
During Tax Season
- Explain to clients how to check on the status of a tax refund through the IRS Where’s My Refund? tool.
- Refer clients with urgent financial needs to a credit union that offers safe, short-term loans.
- Invite clients to learn more about budgeting through a financial coach, counselor, or class. Explore opportunities that can assist clients in “planning ahead” for future delays and to help ease the adjustment.
View materials from the Intuit Financial Freedom Foundation and Prosperity Now’s webinar, “Delayed Refund VITA Communications Campaign: Messaging Strategies and Tools for VITA Programs.”