IRS starts releasing tax refunds delayed in fraud fight, but expect a wait

Millions of tax refunds, delayed by a fight against fraud, finally are on their way. Slowly, on their way.

Many of those filers may not see their money until the week of Feb. 27, even though the IRS is beginning to release the refunds Wednesday.

Such is the continuing aftermath of a combined government and private sector effort to combat tax identity fraud. These include scams that claim and collect refunds using a citizen’s identity before he or she has filed.

The refunds being released belong to legitimate filers who claimed either the Earned Income Tax Credit or the Additional Child Tax Credit. That covers an estimated 15 million filers this year, according to H&R Block.

But their wait is not over.

“Taxpayers will not see the funds deposited into their banking accounts until as late as the week of Feb. 27,” Kathy Pickering, executive director of H&R Block’s Tax Institute, said in an online update posted Monday. “There are many processing steps that the IRS, the Treasury and the banks go through to get the money into the taxpayers hands.”

It was unclear what those processing steps involve, and Pickering was not available Wednesday. But the Internal Revenue Service confirmed that processing at the Treasury and individual banks would further delay receipt of the money. Next Monday’s Presidents Day holiday adds to the delay, the IRS said.

The refunds amount to major cash for families and individual filers.

Individuals and households in Missouri that received the earned income credit collected on average $2,459 last year, for a total of $1.2 billion statewide. In Kansas, similar filers collected on average $2,394, or $496 million across the state.

Missouri filers qualifying for the additional child credit last year received an average of $1,322, or $439 million statewide. Kansas filers received an average of $1,404 under the additional child credit, or $214 million statewide.

These are working filers who qualify for the credits because of their income levels. And the delays have impact throughout the economy.

Tax refunds provide the biggest one-time cash infusion for many consumers, who often use them to pay bills or make important spending decisions. The IRS even issued an alert last November saying the delays for these filers was coming, so they could adjust their holiday shopping plans accordingly.

T-Mobile CEO John Legere even noted the impact Tuesday during the company’s quarterly update on its financial results and customer counts.

He said many consumers waiting for refunds would similarly delay decisions to sign up for new cellular service, particularly for plans that require them to pay for service in advance of using it.

“It significantly impacts prepaid (subscriptions) and the timing, which you know is is highly lumpy,” Legere said during a conference call with investors and analysts.

At the same time, the delays help ferret out false claims based on stolen identities. Such fraud sometimes involves a scam to steal a tax filer’s identity and then file, claim and collect these credits before the legitimate filer has acted. Scammers even use stolen identities of filers who wouldn’t qualify for the credits.

Taxpayers waiting for these refunds can start looking for updates on the status of their funds by visiting the IRS’s “Where’s My Refund?” online service.

An IRS toll-free telephone service also will operate Saturday from 9 a.m. to 5 p.m., in each time zone and again on Monday from 7 a.m. to 7 p.m. despite the official Presidents Day holiday. The number is 800-829-1040.

Otherwise, the tax season has been progressing, the IRS said. Through Feb. 3, nearly 20 million returns had been processed, including nearly 6.6 million with refunds.

Refunds through that date averaged $1,994 for a total of $13.15 billion.

This story was originally published February 15, 2017 at 12:08 PM with the headline "IRS starts releasing tax refunds delayed in fraud fight, but expect a wait."