These tax credits could delay your refund

As tax-filing season gets underway, one of the first questions Americans ask is: How quickly will I get my refund?

The good news: The IRS expects to issue over 90 percent of refunds in less than 21 days. And if you file electronically and request direct deposit, you could get your money in as little as 14 days.

But not if you're among the 28 million taxpayers who'll claim the Earned Income Tax Credit (EITC) or the 20 million who'll claim the Additional Child Tax Credit (ACTC). In those cases, your refund will take much longer to receive.   

By law, the IRS must hold these refunds until Feb. 15, even if you filed at the earliest date possible in January. The delay gives the IRS additional time to review returns claiming these credits. The law requires the IRS to hold the entire tax refund -- not just the portion associated with these tax credits.

The IRS said the earliest it expects to process these refunds is Feb. 27. A few additional few weeks of delay will hit those who get their refund by check or have errors on their returns.

This slowdown may create a cash flow glitch for those who rely on a quick refund to help pay off holiday bills.

The extra review the IRS gives returns with these tax credits aims to give the agency more time to detect and halt tax refund fraud. Tax fraudsters know how simple it is to file a fake return with no income, claim the EITC and ACTC, and receive a big check from the Treasury. So these credits have been a hot target for fraud.

The EITC is a refundable tax credit, meaning you can get a refund even if you don't pay or owe any income tax. The credit is available for people who work and don't have a high level of earned income

For people with no children, the credit can be about $510. The maximum credit allowed on 2017 tax returns is $6,318, which is available if you claim three or more qualifying dependent children. For 2017, the EITC is available to those who had the following amounts of adjusted gross income and number of children:

  • $48,340 (single or head of household filers) or $53,930 (married filing jointly) and three or more qualifying children
  • $45,007 (single or head of household filers) or $50,597 (married filing jointly) and two qualifying children,
  • $39,617 (single or head of household filers) or $45,207 (married filing jointly) and one qualifying child,
  • $15,010 (single or head of household filers) or $20,600 (married filing jointly) and no qualifying children.

The Child Tax Credit is worth as much as $1,000 per qualifying child depending on your income. If the amount of your Child Tax Credit is reduced below $1,000 per child (because it can't be more than the amount of the income tax you owe), you may be able to claim the ACTC.

The eligibility rules for claiming the EITC are in Publication 596. The IRS also provides an EITC Eligibility Assistant tool on its website.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.