IRS issues stern warning for taxpayers claiming 2 popular credits IRS issues stern warning for taxpayers claiming 2 popular credits.

  • Key Points

    Tax credits reduce your tax bill dollar-for-dollar, unlike deductions that lower taxable income.
    The IRS delays refunds for people claiming two particular tax credits.
    Refunds are withheld by law, but could cause filers financial stress as they await the money's arrival. Tax credits are incredibly valuable to those who receive them.

    Credits work differently from deductions. Instead of reducing your taxable income, so you save money by not having to pay taxes on that income, credits reduce the tax due on a dollar-for-dollar basis.
    Say, for example, you get a $2,000 tax credit. If you owed $5,000 in taxes, your $2,000 credit means you'll only owe $3,000.

    If you are eligible for credits, you should always claim them. However, you also need to heed this stern warning from the IRS if you are claiming two of the most popular tax credits available.

     


    IRS issues important warning on tax credits

    According to the IRS, if you claim two specific tax credits, your tax refund will arrive much later than it does for other filers. Those two tax credits include:
    The Earned Income Tax Credit (EITC)
    The Additional Child Tax Credit

    While customarily, people who submit tax returns can expect a refund within 21 days of e-filing their taxes, according to the IRS, those who claim either of these credits must wait until at least March 2 to get their refunds.

    Plus, refunds will only arrive that early if the filer chooses direct deposit and if the filer chooses direct deposit and there aren't any other issues with their return.

    Why tax refunds will be delayed for those who claim certain credits

    The reason tax refunds will be delayed for tax filers claiming these two popular credits is the PATH Act of 2015.
    This law prohibits the IRS from issuing either the Earned Income Tax Credit refunds or the Additional Child Tax Credit refunds until mid-February,
    regardless of how soon in the tax filing year you submit your return.

    This extra time enables the IRS to take
    extra steps to fight fraud, including verifying your income and your eligibility for the credits that you are claiming.
    "By law, we can't issue EITC or ACTC refunds before mid-February. This includes your entire refund, not just the part that's related to the credit you
    " the IRS
    claimed on your tax return," the IRS website says. "If you claim the EITC or
    ACTC, we may need more information from you about your return. If we do, we will send you a letter."

    Delayed refunds could cause financial stress for tax filers

    A delayed refund could be a source of financial stress if you're counting on the money to help you pay bills or accomplish other financial goals.