By Makeela Brathwaite and Zade Haobsh
For over 15 successful years of operating our Volunteer Income Tax Assistance (VITA) program, the Grow Brooklyn VITA program prepares taxes free of charge for individuals and families. We accomplish this by working with experienced volunteers who certify with the Internal Revenue Service as tax preparers; many of these volunteers and staff have broken away from the predatory for-profit retail tax business to use their skills for the public good.
Through our rigorous training and quality review, we make sure every tax return is as accurate as possible and that it claims every credit applicable, especially the Earned Income Tax Credit (EITC) and the Child Tax Credit.
Recently, Congress passed the PATH (Protecting Americans from Tax Hikes) Act, which made tax credit expansions to the Earned Income Tax Credi. EITC is considered the nation's largest anti-poverty program. Providing much needed financial relief working families, the EITC brought 9.8 million people above the poverty line in 2016. Community-driven tax preparation services like ours help to reduce barriers to tax preparation by encouraging families with incomes below the filing threshold to file a returns and claim the EITC.
Depending on your circumstances, EITC can increase the refund you will receive from the IRS. This credit can be worth over $6,000 to qualified filers who know to claim the credit. When filing on one's own, some eligible tax filers may neglect to claim EITC, this can sometimes result in a balance due or a modest refund.
For the upcoming tax year, there are some new changes for the EITC of which you should be aware: If you claim the EITC, your tax refund will be held until February 15, 2017. Beginning in 2017, no federal 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.
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). There is no way to workaround this delay and receive the full refund to which you are entitled, no matter what commercial preparers may tell you.
This delay will happen if you qualify for and claim the EITC, even get your W-2s early, and choose to e-file and give the preparer your bank account and routing numbers for direct deposit. Keep in mind that this only affects the federal tax refund, you will still receive your state refund within the expected 3-4 weeks.
The purpose of this delay is to guard taxpayers against fraud; during the time frame in which the refund is being held, the Internal Revenue Service will take greater scrutiny in matching tax return withholdings with the W-2s the employers send to the IRS by January 31st. The expected outcome is that paying closer attention will reduce fraud. If you file after February 15, your refund should be processed within the normal 21-day timeframe.
Most refunds are expected to be issued within 21 days of processing. If the IRS identifies significant mismatches between the income information provided on the return and provided by employers, there can be additional delays as the IRS seeks to resolve the mismatch
If you are EITC-eligible you should:
- File as you normally do. There is no need to use a commercial preparer, despite the claims they may make about getting you a refund earlier.
- Understand that the purpose of the refund delay is to help protect you and your refund, and that the delay applies to all methods of tax filing — at a VITA/NYC FREE Tax Prep site, by a commercial tax preparer, or self-preparation. No one can provide your refund before February 15. There are no exceptions!
- Be aware of offers of loans against delayed refunds, such as a loan on a refund claim based on a year-end paystub instead of a W-2. Loan fees are expensive and the return may be inaccurate without all income information, but the loan must be repaid.
While the delay applies specifically to tax filers claiming the EITC and ACTC, it will affect your entire refund, including refunds based on over withholding or other tax credits. You cannot receive a partial refund.
Everyone is not affected by the delay. Taxpayers claiming the EITC and other affected tax credits who file returns after February 15 will not be impacted. Additionally, early filers who are ineligible to claim the EITC will not be affected. Refunds based only on over withholding or other tax credits will not be held.
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