Extended Tax Credits Under the PATH Act
The PATH Act includes some good news for those looking to claim the Additional Child Tax Credit (ACTC). This refundable credit allows eligible families a significant break on their taxes — up to 15% of the income they earned above an initial threshold of $3,000. For example:
- If a family earned $40,000, the possible 15% refund would be applied to $37,000 (the amount left after the $3,000 threshold).
- While expiring tax laws would have raised this threshold to $10,000 (potentially lowering the available refund amount), the PATH Act keeps the threshold at $3,000 permanently.
Similarly, the PATH Act permanently increases the income phase-out threshold for the Earned Income Tax Credit (EITC) by $5,000 for those who are married or filing jointly. This means that couples who earned a few thousand dollars more than would have been originally allowed may now be eligible to receive the full EITC for their income bracket.
The Trade-Off: A Delay in Some Tax Refunds
Most people claiming the EITC and ACTC can expect an overall tax refund. However, the PATH Act stipulates that the IRS must withhold refunds for filers who claim these tax credits until February 15.
So if you file before February 15, you're owed a tax refund and you're claiming either the ACTC or EITC, your entire refund will be withheld until at least the February 15 deadline. This delay allows the IRS time to match information from individual tax returns with information on the W-2 forms from employers, which are sent to the IRS by January 31, as a way of preventing identify theft and fraud.
