New Regulations to Delay Tax Refunds Could Hurt Low-Income Filers

By Kate Skochdopole

Last December, President Obama signed into law a bipartisan bill that renewed expiring provisions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), ensuring that millions of low-income working families would not fall into or deeper into poverty in 2017.

But this bill also contained a measure that would require the IRS to wait until February 15 to issue tax refund checks each year. Although this new regulation would give the IRS more time to go over W-2 forms in order to reduce errors, it could harm the lowest-income families who rely on their tax refunds to make ends meet.

Scholars have found that many working families plan their financial year around collecting the EITC and CTC, and they often are eager to file their taxes as early as possible, usually mid-January or early February. Advocates, including Mark Steber, chief tax officer at Jackson Hewitt Tax Service Inc., are concerned that if filers have to wait longer for their refunds, they may be more likely to turn to predatory lenders who could harm them financially in the long-term.

“I just can’t see another month for that many taxpayers not creating demand somewhere,” he told theWall Street Journal.

As an alternative to delaying tax refunds for those who need them most, lawmakers seeking to reduce tax return errors could instead consider expanding Volunteer Income Tax Assistance (VITA) services, according to research done by the Corporation for Enterprise Development (CFED). VITA preparers file taxes free of charge for low-income individuals and boast a 94% accuracy rate, far higher than many paid tax preparers.