What is the PATH Act and how does it affect my return?

PATH Act – Protecting America from Themselves and Early Tax Refunds

PATH ActJust kidding, that’s really not the name of the new law which took affect in 2017.

But what is this new law anyway? It’s called the PATH Act.  The “Protecting Americans from Tax Hikes (PATH) Act of 2015” is part of the Consolidated Appropriations Act of 2016 enacted on December 18, 2015.  It has hundreds of provisions unrelated to an actual tax refund delay. There is one that particularly affects the way tax returns will be processed by the IRS.  It is part of “program integrity” provisions that were designed to help reduce fraudulent and improper refunds.  It changes when refunds will be released if the Earned Income Tax Credit or Additional Child Tax Credit is claimed. It requires that:

Effective for credits or refunds made after Dec. 31, 2016, no credit or refund for an overpayment for a tax year will be made to a taxpayer before the 15th day of the second month following the close of that tax year (generally February 15 of the following year), if the taxpayer claimed the EITC or additional child tax credit on the tax return. (Code Sec. 6402(m) as amended by Act Sec. 201(b) and Act Sec. 201(d)(2))

In the case you are insanely bored and want to read the actual PATH Act language…

Or if you are a nerd like some of us who sit and read actual laws, we fired up the Google machine to find the Consolidated Appropriations Act of 2016 which contains the PATH Act. If anyone wants to read a 900+ page piece of legislation to look at the PATH integrity provisions, by all means–go at it.  The meat of it is in the EARLIEST DATE FOR CERTAIN REFUNDS on Page 836.  Don’t want to read or scroll, Search for 26 USC 6402.

“….No credit or refund of an overpayment for a taxable year shall be made to a taxpayer before the 15th day of the second month following the close of such taxable year if a credit is allowed to such taxpayer under section 24 (by reason of subsection (d) thereof) or 32 for such taxable year. …”

The provision that makes a change to the way early filers are used to seeing refunds deposited can be tied to Treasury Inspector General for Tax Administration (TIGTA) recommendations (butt chewings) given to the IRS in recent years.  TIGTA evaluates the IRS handling of tax returns.  And they have had there fair share of kicks in the ass in the past several years.

If you are worried about the PATH Act, we say don’t.

This should only affect people who file early in January and February. “Should” is the operative word here. Tax refunds do usually come in under 21 days, yeah you know the speech (really… they do). So even if you file early in the last week of January or first two weeks of February, your refund could very well be released in that timeframe.