Low-Income Families May Not Get Their Tax Refunds Until March or Later

Those who need that money the most may have to wait the longest.

Most years, a delayed tax refund is an unquestionable annoyance. But this year, a refund delay could spell the difference between making ends meet and landing in debt.

Right now, consumer prices are way up across the board thanks to rampant inflation. That's put a big strain on lower-income households, especially those without any money in savings to fall back on.

Compounding the problem is the fact that monthly installment payments under the boosted Child Tax Credit dried up in December, even though recipients had been hoping to see them extended into 2022. Those monthly payments helped pull millions of children out of poverty and made it possible for households to cover their expenses in the face of rising living costs. And while President Biden had written a one-year extension of the boosted credit into his Build Back Better bill, that bill appears to be doomed.

As such, many tax filers are no doubt anxiously awaiting the arrival of their tax refunds. But some filers -- specifically, those who might need that money the most -- may have to wait to get it.

When fraud prevention hurts individuals

Tax filers who are claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) will generally have to wait until early March or later to receive their refunds. The reason? The PATH Act of 2015 requires the IRS to hold refunds for these specific credits until Feb. 15 due to high instances of fraud related to them.

These credits are both refundable, which means a filer can get a refund even if they don't owe any tax. Many tax credits aren't refundable, and the most they can do is reduce a filer's tax liability to $0. But because the EITC and ACTC are refundable -- they're a common target for criminals.

Plus, it takes time for tax refunds to arrive from when the IRS can start processing them. So despite that Feb. 15 deadline, the IRS says the earliest those claiming the EITC or ACTC should expect their money is the first week of March.

Worse yet, those claiming these credits will have their entire refund withheld until Feb. 15 -- even if part of that refund doesn't relate to these credits. The IRS isn't in the practice of issuing partial refunds, which means those in that situation will just have to wait things out.

How to expedite your tax refund

Despite the frustrating delays associated with the EITC and ACTC, if you're entitled to one of those credits, it still pays to claim it. Both credits can be very lucrative, and it's not worth giving up that money to get your refund sooner.

But whether you're claiming one of those credits or not, you can take these steps to help expedite your refund:

• File your taxes electronically rather than on paper.
• Make sure your tax refund is free of errors.
• Have your refund deposited directly into your bank account, as opposed to waiting for a check in the mail.

It's unfortunate that the people who probably need their tax refunds the most will face unavoidable delays. But preventing tax fraud is a good thing, and doing that could help ensure that these important credits stick around for the long haul.