HRB H and R Block Inc

By Richard Rubin 

Millions of low-income and middle-income taxpayers shouldn't count on getting their tax refunds until Feb. 27, more than a month after the tax filing season opens, the IRS said Thursday.

That is the result of a new law passed by Congress that's designed to cut down on tax fraud.

The IRS must delay paying out refunds on returns that claim the earned-income tax credit or a child tax credit.

About 15 million households -- or 10% of all individual income-tax returns -- will be affected by the delay, according to H&R Block Inc., the tax-preparation company.

Those returns are the most likely to contain identity-theft fraud, because criminals can claim refunds of $3,000 and up using those tax breaks and get the money before the real taxpayer even knows what happened. But they are also the returns of the low-income taxpayers who file their tax returns early in the year and rely heavily on those refunds to pay down debt, make big purchases or replenish savings.

"For many people, this is the biggest check they see all year," said IRS Commissioner John Koskinen.

The delay will allow the Internal Revenue Service to match information on the tax returns with income data on W-2s filed by employers. Mr. Koskinen didn't have an estimate of how much additional fraud the IRS might catch. The nonpartisan congressional Joint Committee on Taxation projected the law would increase federal revenue by $779 million over a decade.

Over the past few years, the IRS has processed tax refunds faster and now says 90% of taxpayers get their money within 21 days. That speed and direct deposit of refunds helped shrink the short-term lending market that bridged the gap for low-income households waiting for checks in the mail, but it also created opportunities for fraud.

Mr. Koskinen said taxpayers should file their returns as they normally would and that the IRS would process them as it receives them. Then, he said, the agency will release all approved refunds on Feb. 15, the first date the new law allows.

But Presidents Day on Feb. 20 and processing times for the federal government and banks mean that refunds may not land in taxpayers' bank accounts until Feb. 27.

Estimated arrival dates for those refunds won't show up in the agency's online "Where's My Refund?" tool until after Feb. 15.

The IRS will begin accepting 2016 tax returns on Jan. 23. This year's deadline -- without allowed extensions -- is April 18, not April 15, because of a weekend and the Emancipation Day holiday in Washington, D.C.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

January 05, 2017 15:25 ET (20:25 GMT)

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