Updated: Feb 23, 2020
Before I dive into this week’s topic, I must announce that tax season is set to officially open on Monday, January 27th, 2020.
This week’s tax topic is geared towards the tax season innovators. First, let’s address who is a tax season innovator. A person is classified as a tax season innovator if they are among the first group of individuals to file their return at the break of tax season. Being part of this group is not necessarily a bad thing, it does have its pros and cons, nevertheless,
it’s more so about being vigilant and aware.
As a tax season innovator, you are more likely to be audited by the IRS. This is not something that you should be terribly stressed about, especially if you are confident that your return was filed accurately and truthfully. Nevertheless, keeping in mind that there is a high possibility of it occurring . These potential audits are due to the increase in fraudulent activities takes place especially at the start of tax season. This is because fraudsters tend to file early in the season using the taxpayer’s information to claim all the benefits that the taxpayer would ordinarily claim and more. Unless the taxpayer is contacted by the IRS, the only way they would come to terms with the reality is when they attempt to file their own return and the tax software produces an error message that informs the tax preparer that “a tax return with this social security number has already been filed”. Hence, the reason for such audits. The IRS’s objective is to ensure accuracy in the return and ensuring that the taxpayer's identity is correct. Therefore, if you do receive a tax notice from the IRS after filing your tax return, don’t be scared, simply follow their instructions and respond promptly. With that said, actions like these tend to put a slight delay on the tax refund turnaround time.
Now, filing your tax return early does not guarantee you to be amongst the first to obtain a refund from the IRS. The TCJA of 2017 caused the processing time of refunds to be delayed during the start of tax season versus prior to the enactment of this tax legislation. Therefore, taxpayers should anticipate a slight delay once again in the receival of their tax refund this year. However, if the taxpayer is claiming certain tax credits like the Child Tax Credit (CTC) or Earned Income Tax Credit (EITC), the delay is even more stringent. *CTC - Claiming a dependent under the age of 17
*EITC – If the income you earned meets certain income threshold with or without a child (geared towards low income taxpayers).
If you are claiming any of these credits the IRS will not be processing refunds associated with them until after February 15th, not to mention, though the refund may be processed after February 15th, the actual funds will not be deposited into the account until the last week of February leading into the first week of March. Of course, this is if there are no delays with the tax return being processed.