What’s the PATH Act?

IRS, e-filing | October 12, 2017 | By Susannah McQuitty

A woman looks up the PATH Act in a coffee shop.

Does the phrase “your refund may be delayed this year” ring any slightly unpleasant bells? Last tax season, many taxpayers (especially those who filed early) saw delays in the IRS refund processing period.

You may have heard whispers of one possible reason for these delays: the PATH Act. What exactly is this bill, and why is it making people’s refunds show up later than usual?

The purpose of the PATH Act

The Protecting Americans from Tax Hikes Act (PATH Act) has been around since late 2015, and one of its key provisions is intended to protect taxpayers and their families from tax fraud.

To do this, the PATH Act requires some extra security measures of the IRS during the processing period.

A coffee cup held in front of a map

Refund delays for some early filers

The PATH Act requires the IRS to take extra time when examining tax returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC).

These two family-focused credits are refundable, meaning that any amount left after covering your tax liability will be given in a refund. And you better bet the criminals are on that faster than you can say “inflated refunds.”

With the extra review time mandated by the PATH Act, the IRS is better able to stop refunds from being issued via fraudulent claims.

So, if you claim the EITC or ACTC, know that your refund won’t be issued until February 15, no matter how you filed your return (online, via tax preparer, etc.). It’s still a good idea to file early—even if you know you won’t get your refund until mid-to-late February—since that’s the best defense against fraudsters filing with your information.

ITIN renewals and changes

The IRS issues an Individual Taxpayer Identification Number (ITIN) to individuals who aren’t eligible for a Social Security Number but still need a tax ID.

Since many cybercriminals use neglected ITINs to file fraudulent tax returns, any ITIN that hasn’t been used at least once in the last three years needs to be renewed. If you don’t renew, your ITIN could cause delays or even ineligibility for some tax credits.

It’s change, but it’s good change

A delayed refund may be a pain, but better late than never, right?

You may have some delays based on the credits you claim, and you might have to take some time to renew your identification, but these PATH Act requirements are ultimately in place for your security and protection.