Recently, a bill was introduced by the House Ways and Means Committee and the Ways and Means Oversight Subcommittee, intending to eliminate tax refund delays for individuals who received the Earned Income Tax Credit (EITC) and filed their taxes early. Often, these delays also impact Child Tax Credits (CTCs) claimed by EITC recipients. DM Payroll Solutions outlines the newly proposed bill and what it could mean for early EITC filers if passed.
Since 2015, the Internal Revenue Service (IRS) withholds refunds for filers claiming refundable tax credits at the beginning of tax season until Feb. 15. This withholding period allows the IRS time to compare information from individuals’ tax returns with their employers’ W-2 forms, which must be submitted to the IRS by Jan. 31. Additionally, the IRS uses this time to monitor returns for tax fraud, identity theft and other tax-related crimes. The proposed bill would allow the IRS to disburse EITC and CTC refunds prior to Feb. 15 only after verifying the amounts on an early filing individual’s tax return and W-2 forms.
There is only a week left until Feb. 15 and (as of this writing) there has been no movement in passing the bill, especially as congressional Democrats have been stalled for months in the passing of the Build Back Better Act, which would extend the enhanced CTCs provided under the recently sunset American Rescue Plan Act.
DM Payroll Solutions will keep you updated with any news on the passing of this proposed bill for this tax season or next year’s. In the meantime, be sure to contact us to streamline your EITC and CTC reporting needs in the coming tax year.