EITC and Additional Child Tax Credit Delays in 2017

The IRS has announced new processing procedures involving the Earned Income Tax Credit and the Additional Child Tax Credit during the first few weeks of 2017, and during the latter half of 2016, the agency hopes to prepare taxpayers and tax professionals for this major change.

As part of the PATH Act passed in December of 2015, the new law mandates that no tax credit or refund for an overpayment for a taxable year shall be made to a taxpayer before February 15th if the taxpayer claimed Earned Income Tax Credit or Additional Child Tax Credit on their return.

This change will go into effect January 1, 2017, and may affect some returns filed early in 2017. This means that:

  • The IRS will hold the refunds on EITC and ACTC-related returns until February 15th. The agency will also hold onto an entire refund that falls into this category, rather than issuing partial refunds.
  • Taxpayers should file as normal, and tax professionals should submit returns as normal. The IRS will still be accepting and processing returns once the filing season begins; that process will not change with the new law.
  • The IRS still expects to issue most refunds in less than 21 days, though the IRS will hold EITC and ACTC refunds until February 15th and then begin issuing them.

With these new steps in place, the hope is that the law can help prevent identity theft and fabricated withholdings revenue loss as well as ensure that taxpayers receive the refund they are owed.

The IRS will continue to share information with taxpayers at www.irs.gov as information becomes available through the fall of 2016.