Raleigh, N.C. Millions of people depend on their tax refund checks for everything from paying household bills to taking a vacation, but the federal government is putting a hold on some refunds this year in an effort to fight tax fraud.
The Internal Revenue Service is delaying tax refunds for more than 40 million low-income families who claim the Earned Income Tax Credit and the Additional Child Tax Credit. These tax breaks are geared to benefit the working poor, and many families claim both.
The tax filing season starts Jan. 23, but a new law requires the IRS to delay tax refunds for people claiming those two credits until Feb. 15 so the agency has more time to screen the returns. Early tax refunds often go out before they can be verified.
The IRS reports $15.6 billion in improper tax refunds in 2015 alone, and the two tax credits have long been known as targets for fraud.
Rocky Mount businessman Larry Hill, who billed himself as "The People's Champ," for example, made millions manipulating the Earned Income Tax Credit for filers by falsely reporting interest income, withholdings and dependents.
WRAL Investigates also reported on a Charlotte-based ring that used fake documents and tax IDs to obtain millions of dollars in bogus refunds, many of which were delivered long before the government could verify names or employers.
"They want to hand out these refunds so fast. Stop and investigate before you hand it out," Nancy Dawkins, a local CPA, said in 2012.
In addition to slowing refunds, the IRS will do more to share and compare taxpayer data with states and tax preparers. A new verification code will accompany millions of W2 forms.
Alexandra Sirota, director of the left-leaning North Carolina Budget and Tax Center, said that, although she supports efforts to reduce fraud and improper refund payments, the delays will hurt legitimate tax filers who count on their refunds.
"This is a huge impact on household budgets," Sirota said. "It's really the chance one chance in a year for low-income working families to catch up on bills, to make payments on things they need for their household, fixing the car, replacing a broken washer and dryer."
Tax fraud prevention efforts are working for the IRS. Last year, new verification requirements helped reduce identity fraud cases by 50 percent.
Sirota said she worries many low-income tax filers will turn to costly bridge loans because of the refund delays.
Read the rest here:
Slowing tax refunds aimed at cutting fraud :: WRAL.com
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