PATH Act Impact on Taxpayers in 2017

As a part of the Internal Revenue Service (IRS) efforts to safeguard against tax fraud and identity theft, the Protecting Americans from Tax Hikes (PATH) Act was enacted on December 18, 2015. The PATH Act contains several changes to the tax law that will affect individuals and families in 2017.

Most significantly, the IRS has issued warnings of delays impacting 40 million working poor families claiming the earned income tax credit and the additional child tax credit. For 2016, the maximum earned income tax credit is from $506 for no qualifying children, to $6,269 for three or more qualifying children.

“We are warning our clients not to expect their returns until mid-February at the earliest,” said Glenda Britt, CPA, John Kasperek Co., Inc. in Calumet City, Illinois. “We want to communicate as much information as possible as we know so many families count on these checks."

According to the IRS, the practice of filing of fraudulent returns and claiming tax payers refunds before they have a chance to file has grown significantly over the years. The expected delays will give the agency more time to screen these returns. Tax filing starts January 23. You can check your refund status at IRS.gov if you are able to provide your social security number, filing status and refund amount.

Other PATH Act provisions impacting taxpayers include but are not limited to:

Wrongful-incarceration Exclusion
The PATH Act includes new wrongful-incarceration exclusion. This legislation provides a special one-year window during which an eligible wrongfully-incarcerated individual can file a refund claim based on any civil damages, restitution or other monetary award received and reported in a prior tax year, even if the normal statute of limitations had already expired for that year. The guidelines are contained in a set of frequently-asked questions, posted on IRS.gov.

ITIN Changes and Renewals
The PATH Act provisions related to the Individual Taxpayer Identification Number (ITIN) program require some taxpayers to renew their ITINs beginning in October 2016. ITINs that have not been used on a federal tax return at least once in the last three years will no longer be valid for use on a tax return unless renewed by the taxpayer. Taxpayers using an expired ITIN could face a refund delay and may be ineligible for certain tax credits. These provisions, along with new procedures to help taxpayers navigate these changes, are outlined in IRS Notice 2016-48, and on IRS.gov.

Britt added, “We will continue to update our clients directly as well as provide relevant information through our website as it becomes available and any new pronouncements or warnings are issued by the IRS.”

See also “PATH Act Impact on Employers in 2017.” As always, these statements reflect the opinions of John Kasperek Co., Inc. and you should consult your attorney and/or tax professional to best determine how the law affects your unique situation.