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New Federal Tax Law May Affect Some Refunds Filed in Early 2017; IRS to Share Details Widely with Taxpayers Starting This Summer

The Internal Revenue Service has announced initial plans for processing tax returns involving the Earned Income Tax Credit and Additional Child Tax Credit during the opening weeks of the 2017 filing season. The IRS is sharing the information now to help the tax community prepare for the 2017 season, and plans are being made for a wider communication effort this summer and fall to alert taxpayers about the changes that will affect some early filers.

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 begins Jan. 1, 2017, and may affect some returns filed early in 2017. Additional information is listed below.

  • 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.
  • 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.
  • 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 we do every year. That will not change.
  • 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 2017 until Feb. 15 and then begin issuing them.

This is one more step the IRS is taking to ensure taxpayers receive the refund they are owed. The IRS plans to work closely with stakeholders and IRS partners to help the public understand this process before they file their tax returns and ensure a smooth transition for this important law change.

 

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What You Need to Know This notice required by IRS Circular 230, which regulates written communications about federal tax matters between tax advisors and their clients.  To the extent the preceding correspondence and or any attachment is a written tax advice communication, it is not a full "covered opinion."  Accordingly, this advice is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS.
This E-mail and any accompanying documents contain information that is confidential and protected by the work product privilege.  The information is intended for the individual or entity named in the transmission.  If you are not the intended recipient, be aware that any disclosure, copying, distribution or other use of the transmitted contents is prohibited.  If you have received the e-mail in error, please notify me immediately by phone.​

Disclosure and Use of Taxpayer Information – New IRS regulations provide taxpayers with greater control over their personal tax return information. The Internal Revenue Code, Section 7216, Disclosure or Use of Tax Information by Preparers of Returns, became effective January 1, 2009. These regulations limit tax return preparers' use and disclosure of information obtained during the return preparation process.

Anti-abuse rules – Act Sec. 1211(c) gives IRS the authority to issue rules which are necessary to prevent the abuse of the purposes of Act Sec. 1211, including anti-stuffing rules, anti-churning rules (including rules relating to sale-leasebacks), and rules similar to the regulations under Code Sec. 1091 relating to losses from wash sales.

 

Schedule an appointment to learn more about important changes in tax law.

 

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