Delayed Refunds, and Additional Information Required for Certain Tax Credits on Your 2016 Return

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Jan 01, 2017

The 2017 tax filing season opens January 23, 2017, but if you are claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC), the IRS will not issue refunds on these tax returns before February 15th. The delay is to allow the IRS time to confirm W-2 income and other information to document and verify these credits. Also, taxpayers need to be prepared to provide their tax preparers with additional information if they are claiming these two credits, as well as if they are claiming the American Opportunity Tax Credit (AOTC) for qualified higher education expenses.

A new law, Protecting Americans from Tax Hikes Act (PATH Act), was passed in late 2015 that included a “program integrity” section designed to prevent taxpayer fraud and to expand tax preparer due diligence requirements. These tax preparer due diligence requirements now include the Child Tax Credit/Additional Child Tax Credit (ACTC) and the American Opportunity Tax Credit (AOTC), in addition to the Earned Income Tax Credit (EITC).

Due diligence requirements for paid tax preparers under the PATH Act now include the preparation of Form 8867 for all of the above three credits, not just the EITC, if any are claimed on an individual tax return. Due diligence by the tax preparer includes the following:

1. Interview each and every client where any of these three credits apply.

2. Ask adequate questions and document the client responses regarding these credits.

3. Review the information for consistency, correctness and completeness.

4. Obtain documents to support these credits.

Some common examples of information/documents you will be asked to provide are as follows:

If claiming the American Opportunity Credit (AOC) for qualified higher education expenses, you will be required to provide a copy of the 1098-T from the college, as well as a print out of the charges and amounts paid during the year to the college. Often this is accessible only by the student, and you will need to have your child request this information if not able to access online.

If claiming the Earned Income Credit (EIC) or Child Tax Credit/ACTC, be prepared to provide social security cards, birth certificates, and/or school records of dependents. Be prepared to document your child has lived with you over half the year and you are the one eligible to claim the child. If your earned income includes a business, be prepared to provide business income and expense records.

As a result of the PATH Act, be prepared this tax season for additional information requests, or questionnaires to complete, from your tax preparer if claiming the Earned Income Tax Credit (EITC), Additional Child Tax Credit (ACTC) or American Opportunity Tax Credit (AOTC), and delayed refunds for tax returns with the EITC and ACTC.

If you have any questions about information you will be required to provide to claim these credits, please feel free to contact Paula Rogers at, or one of our other qualified tax professionals.