By Julexus Cappell
For most Americans, tax season is a widely anticipated time of year. Family vacations, home improvements, and household essentials are among the countless items families plan for with the money they’ll receive from the tireless hours they’ve worked throughout the year. It’s also a time for paying off debt and taking care of vital bills many aren’t able to pay off with their regular salaries. Unfortunately, millions of taxpayers will see a delay in refund reimbursements due to a new law passed by the Obama administration last December. The Protecting Americans from Tax Hikes (PATH) Act is an effort to create new tax breaks and combat fraud, but it also prohibits the IRS from distributing funds until after February 15th to taxpayers who receive either the Additional Child Tax Credit or the Earned Income Tax Credit.
The IRS reported that about 24 percent of Earned Income Tax Credit recipients received an “improper payment” in 2013 and that number has continued to rise annually. Because of this, the IRS is delaying refunds in an effort to improve their accuracy. While the PATH Act should not be a worry for taxpayers, it serves as an incredible inconvenience to many. This law will primarily affect those who statistically file their taxes sooner for a faster refund turnout – unfortunately, that means lower income individuals, single parent households, and ultimately, minorities.
To tax preparer and Liberty Tax franchise owner Tricia Griswold, the PATH Act will hinder many people from economic relief, and may come as a surprise to those who receive the credits in this first tax year.
“It’s going to be a big deal to them,” Griswold warns. “These taxpayers usually file early and need the money to pay bills, buy groceries, and catch up after spending during the holidays,” she says.
Aside from a delay in funds for millions, another issue concerning the PATH Act is how it will affect banks, credit unions, and cash advance services in the Richmond area. Nearly half a million people in Virginia last year claimed and received either the Additional Child Tax credit or the Earned Income Tax Credit, and the nation’s average return in 2015 was just shy of $3,000. With this new law, banks could face issues having enough funds available to service thousands of people in a shorter time span.
To avoid waiting any longer than necessary, Griswold suggests getting refunds via Direct Deposit rather than a check. This way, funds are readily available.
“If you think about it, the average tax refund is $3,000, and last year, 29 million people had a tax refund before February 15th,” Griswold says. “When [the IRS] releases these funds, the banks will be swamped. People should direct deposit these monies or receive it on a pre-paid debit card because it is unlikely the banks will be able to cash out that many checks immediately,” Griswold said.
Another way to stay on top of income taxes amidst the PATH Act, according to Griswold is to continue to file returns early, as most affected by the PATH Act would before it went into law.
“[Those affected by PATH Act] should still come in and file, just as you would have in past years. We encourage people to come in as soon as they get their W2s, but we have to wait until the IRS opens,” Griswold said.
Although there are offers like advance loans on tax refunds at most major tax offices, it will be an adjustment to those who do not qualify or aren’t interested. The PATH Act, seemingly, is a decent idea for fraud regulation, but ultimately, we need to remember those who rely on funds to stay economically afloat. Those are the ones who’ll hurt the most.