D The IRS has issued a stark warning about tax credits. Credits, significantly, work differently than deductions. Credits reduce taxes on a dollar-for-dollar basis and do not reduce your taxable income.
IRS Alert: Alerts Issued to People Claiming 2 Certain Tax Credits (Pexel – Representative Image)For example, consider a person who received a $2,000 tax credit. If they owe $5,000 in taxes, their $2,000 credit means they will only owe $3,000.
However, if they receive a $2,000 deduction, this will reduce their taxable income. So, if they make $50,000, they will only be taxed on $48,000.
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Their $2,000 credit saves them $2,000. However, if they are in the 22% tax bracket, their $2,000 deduction saves them $440.
Anyone who is eligible for credits must claim them. However, those claiming two of the most popular tax credits available have a warning from the IRS.
Warning from the IRSThe IRS says If someone claims two specific tax credits, their tax refund will come much later than other filers. These two taxes include the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit.
Submitted people Tax returns are usually refunded within 21 days of e-filing their tax. According to the IRS. However, those who claim any of these credits will have to wait until at least March 2 to receive a refund.
Notably, the refund will arrive sooner only if the filer chooses Direct deposit, and no other issues with their refunds.
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This delay is due to tax refund PATH Act of 2015a law that prohibits the IRS from issuing Earned Income Tax Credit refunds or Additional Child Tax Credit refunds until mid-February, regardless of how early in the tax filing year someone files the return.
The extra time allows the IRS to take additional steps to combat fraud. The IRS verifies a person’s income and your eligibility for the credit they are claiming.
“By law, we cannot issue an EITC or ACTC refund before mid-February. This includes your full refund, not just the credit you claimed on your tax return,” the IRS website says. “If you claim the EITC or ACTC, we may need more information from you about your refund. If we do, we’ll send you a letter.”
