Claiming This Tax Credit? Prepare for Your Refund to Be Delayed

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You may have to wait a bit longer to get your money.

Key points

  • The Earned Income Tax Credit is a valuable tax break.
  • Claiming it could put a lot of cash in your pocket but delay your refund at the same time, due to fraud protection protocols.

Lower-income households tend to struggle financially in general. But 2022 was no doubt a particularly brutal year for lower earners. That’s because inflation surged from the start of the year through the end of it, forcing many people to rack up costly credit card debt just to stay afloat.

Making matters worse, the Child Tax Credit did not get a boost in 2022. In 2021, the Child Tax Credit’s maximum value increased, and the credit became fully refundable. This meant that if a filer who was eligible for the credit owed the IRS no money, they could still claim the full value of the credit.

But still, there’s a specific tax credit that lower-income files are commonly entitled to — the

Earned Income Tax Credit (EITC) — that was very much available in 2022. What makes the EITC so valuable is that it’s fully refundable, so even if you don’t owe the IRS a dime, you can still receive its full value.

But if you’re claiming the EITC and filing your tax return in January, you should know that you won’t get your tax refund right away. Here’s why.

It’s all about preventing fraud

Because the EITC is fully refundable, it’s been associated with higher levels of fraud. As such, the Protecting Americans from Tax Hikes (PATH) Act made changes to tax laws that now require the IRS to hold refunds associated with the EITC through mid-February. 

Now normally, if you file a tax return electronically and it’s free of errors, you can expect your tax refund to hit your bank account within 21 days. So if you file your taxes in late January, you might have your money by mid-February — but not if the EITC is claimed on your return. Instead, you may not get your refund until late February if you’re claiming that credit. 

And to be clear, the IRS is required to hold up your entire refund if you’re claiming the EITC on your tax return. It can’t just withhold the portion of your refund that’s associated with that particular credit. 

Is the EITC even worth claiming?

Absolutely. You may not appreciate having your tax refund held up. But the EITC is an extremely lucrative tax credit, so chances are, it’s worth delaying your refund to get that money.

The amount of money the EITC will pay you will hinge on your household size. But for the 2022 tax year, the EITC is worth up to:

  • $560 for filers with no qualifying children
  • $3,733 for filers with one qualifying child
  • $6,164 for filers with two qualifying children
  • $6,935 for filers with three or more qualifying children

So, let’s say you qualify for the maximum $6,935, but you’re forced to wait an extra two or three weeks to get your tax refund. Having to sit tight may not be ideal, but are you really willing to pass up almost $7,000? Probably not.

While many people are desperate to get their tax refunds this year in light of rampant inflation, you should know that if you file your taxes in the next few weeks and claim the EITC, your refund will be held up. But having that information could make the delay easier to manage.

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