The 2017 tax filing season launched on January 23. The IRS predicted a few speedbumps for taxpayers, especially for taxpayers who file early in anticipation of early refunds. The agency expects to receive more than 150 million individual income tax returns. The vast majority of individual income tax returns will be filed electronically and the IRS has extra safeguards in place to protect taxpayers from cybercrime.
Traditionally, the start of the filing season is busy with the IRS processing returns from taxpayers anticipating refunds. This year is no exception but a law passed in 2015 may hold up some refunds. Over the past several months, the IRS has been alerting taxpayers to the change. The law – the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) – impacts taxpayers claiming the earned income tax credit (EITC) and the additional child tax credit (ACTC).
The PATH Act generally requires that no refund will be made to a taxpayer before the 15th day of the second month following the close of that tax year, if the taxpayer claimed the EITC or ACTC on his or her return. This rule in the PATH Act applies to refunds made after December 31, 2016. So this is the first filing season impacted by the new rule.
The IRS has reported that it will begin releasing refunds affected by the PATH Act’s new rule on February 15, 2017. However, many early filers likely will not have access to their refunds until at least the week of February 27, according to the IRS. The additional delay is due to several factors, including the time needed by banks and financial institutions to process direct deposits of refunds, the agency explained.
Along with the advising taxpayers about the possibility of delayed refunds, the IRS also has been stepping up its education about tax-related identity theft. Cybercriminals use a variety of tools to scam taxpayers. Identity thieves call taxpayers and claim to be IRS employees. They demand payment of nonexistent tax debts or they tell taxpayers that the IRS needs to “verify” their personal financial information. Cybercriminals also use emails and social media to trick taxpayers into revealing their personal financial information. These scams are nationwide and leave no one untouched.
The IRS has partnered with tax professionals and the tax preparation industry to protect taxpayers from cybercriminals. Tax professionals must adhere to strict IRS security standards.
Many of these protections are unseen to taxpayers. The IRS has upgraded its return processing filters to discover fraudulent returns. The agency also has safeguards built into electronic filing. Several years ago, cybercriminals breached an IRS app but, according to the agency, criminals have not succeeded in penetrating the agency’s core processing functions.
Keep in mind that cybercriminals are most active early in the filing season. Identity thieves seek to file fraudulent returns early; before taxpayers file their legitimate returns. All too often, taxpayers first learn they are victims of identity theft when the IRS rejects their return. If you have any concerns that your personal information may have been stolen or compromised, please contact our office. Together, we can work with the IRS. The IRS has a special program for victims of identity theft.
Please contact your local UHY LLP professional if you have any questions.