Practice and Procedure: Taxpayers Asking ‘Where’s My Refund’ May Have to Wait Awhile

Following the lead of the IRS, some states have announced that they are delaying personal income tax refunds until late February and March.

The IRS opened the 2017 tax filing season as scheduled on Jan. 23. However, section 201 of the PATH Act, which went into effect Jan. 1, requires that the IRS hold tax refunds on returns that claim the earned income tax credit or the additional child tax credit until at least Feb. 15. As such, affected filers will not begin receiving federal income tax refunds until the week of Feb. 27.

States that have formally announced a similar delay in releasing 2016 state income tax refunds include Alabama, Delaware, Georgia, Iowa, New Jersey and Oregon.

Alabama and New Jersey both announced that they will not begin issuing refunds until March 1, while Delaware and Oregon will begin issuing refunds after Feb. 15. Iowa will delay earned income tax credit refunds until early March, and Georgia notified taxpayers that it will begin processing returns on Feb. 1 and that processing and issuing a refund could take more than 90 days.

The refund delay mandated in the PATH Act has a stated goal of reducing tax fraud by giving the IRS more time to detect it before refunds are processed. States have also cited this reasoning in announcing their own refund delays, and many, including Illinois, employed refund delays during the 2016 tax filing season to improve their fraud detection mechanisms. The Illinois Department of Revenue announced $20 million in savings tied to those efforts.

The federal personal income tax filing deadline is April 15 but will be enforced on Tuesday, April 18 this year because the 15th is a Saturday and the following Monday is Emancipation Day, a holiday in Washington, D.C. State income tax filing deadlines vary by state, but most states conform to the federal deadline.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Will the benefits of delaying income tax refunds outweigh the resultant economic hardships felt by affected taxpayers?

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