This action is driven by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) that was enacted Dec. 18, 2015, and made several changes to the tax law to benefit taxpayers and their families. Section 201 of this new law mandates that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before Feb. 15 if the taxpayer claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return. This change began Jan. 1, 2017, and will affect some early filed tax returns each year after.
- To comply with the law, the IRS will hold the refunds on EITC and ACTC-related returns until Feb. 15. This allows additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings.
- 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.
- The IRS will hold the entire refund. Under the new law, the IRS cannot release the part of the refund that is not associated with the EITC and ACTC.
- 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).
- Taxpayers should file as they normally do, and tax return preparers should also submit returns as they normally do.
- The IRS will begin accepting and processing tax returns once the filing season begins, as they do every year.
- The IRS still expects to issue most refunds in less than 21 days, though IRS will hold refunds for EITC and ACTC-related tax returns filed early in 2020 until Feb. 15 and then begin issuing them.