PEORIA — Taxpayers claiming certain common credits will once again have to wait weeks to months for their federal income tax refund, repeating a delay first experienced last year as part of anti-fraud measures.
The Internal Revenue Service recently announced it will begin accepting tax returns on Jan. 29, with a filing deadline this year of April 17 — two days beyond the traditional due date.
But taxpayers claiming the earned income and the additional child tax credits won't have refunds deposited until Feb. 27 at the earliest, "if they chose direct deposit and there are no other issues with the tax return," according to a statement from the IRS.
Some low-income workers and families who qualify for those credits rely on refunds to pay down debt incurred over the holidays, giving the delay an outsize effect on the taxpayers who need it most, according to Nate Peck, an accountant with the Peoria tax preparation service Taxes Now.
"Christmas is just over, so a lot of people are out of money. This is a way people can get money to replenish," Peck said. "It's a cash flow issue. People know that they've got the money coming in, they just don't have access to it."
The refund delays are part of a change to federal law aimed at detecting fraudulent returns. The IRS will hold the entire refund of taxpayers claiming the associated credits, not just the portion related to those credits, according to a statement from the agency.
In Illinois, banks have been barred from charging interest on tax refund loans since 2013, reducing the availability of instant cash services through tax preparers. Peck still offers the service but said he is restricted from charging additional fees to those who choose to use it.
The credits subject to the delays amount to huge sums for Illinois taxpayers. During part of the 2016 tax season alone, the IRS paid $2.5 billion in earned income tax credits on almost 1 million returns from Illinois residents. Taxpayers in the state also claimed nearly $1 billion in additional child tax credits on almost 800,000 returns.
Instances of tax return fraud associated with those credits, however, also amount to billions of dollars. In one recent tax year alone, more than 5 million returns were filed using false identities, according the U.S. Department of Justice.
Matt Buedel can be reached at 686-3154 or firstname.lastname@example.org. Follow him on Twitter @JournoBuedel.