IRS Considers Delaying Refunds To Combat Fraud

Refunds Delayed Till Summer?
Will Refunds Be Delayed Next Year?

Acting IRS commissioner Steven Miller recently sat before a congressional panel and hinted that the best way to combat the explosion of tax fraud may be to either delay the tax filing season, or wait to release all refunds until after the filing season concludes on April 15th.

The reasoning goes something like this:  The vast majority of fraud involving income taxes occurs early in the filing season (January & February). Delaying the filing season will reduce fraud because a) It gives the IRS a chance to cross reference filed tax data with what employers are required to send to the IRS and b) There will simply be less time to perpetrate fraud and thus less cases.  Looking simply at the black & white numbers, yes this would seem like a good idea.  However, like the tax code, this is not a black & white issue.  Millions of honest taxpayers file their returns as early as possible because they really need the money.  These are usually lower-income taxpayers who depend on their refunds to pay bills, rent, and put food on the table.  When you consider the money spent for the holiday season, the urgency for these refunds is magnified.   Delaying the start of the filing season could seriously put these taxpayers at risk.

Another proposal involves waiting until after April 15th to issue all refunds.  That way every tax return can be reviewed and verified before refunds are released, and would virtually eliminate the majority of fraud cases.  However, under current IRS regulations, the government would be required to pay taxpayers interest on their delayed refunds.  This cost of combating fraud could outweigh the cost of the fraud itself.

Either way, it is very early to speculate proposed changes and whether or not they will be implemented. Nevertheless, if either of these proposals are ultimately implemented in full or in part, it appears the group that will be affected the most will be the lower income taxpayer.

Source: Chicago Tribune

Are you Eligible for the Earned Income Tax Credit?

With the unemployment rate soaring, more taxpayers than ever will qualify for the Earned Income Tax Credit.  The Earned Income Tax Credit also known as EITC, is a refundable tax credit that was created to assist low to moderate income individuals and families.  This year the EITC can mean up to $5,666 for some families, and that is only the federal credit.  For those who live in New York there is an additional credit on the NYS income tax return as well.  Take a look at the Federal income limitations and credit amounts for the current tax filing 2010.

Tax Year 2010 Income Limits

Earned income and adjusted gross income (AGI) must each be less than:

  • $43,352 ($48,362 married filing jointly) with three or more qualifying children
  • $40,363 ($45,373 married filing jointly) with two qualifying children
  • $35,535 ($40,545 married filing jointly) with one qualifying child
  • $13,460 ($18,470 married filing jointly) with no qualifying childrenInvestment income must be $3,100 or less for the year

Tax Year 2010 maximum credit:

  • $5,666 with three or more qualifying children
  • $5,036 with two qualifying children
  • $3,050 with one qualifying child
  • $457 with no qualifying children

If you are unsure whether or not you qualify for this credit you can use the EITC Calculator, or visit your local R&G Brenner Income Tax Professional.

Source: EITC.irs.gov