By: L. Alexis Whitley, Esq. and Nick Richards, Esq.
With filing season approaching for many taxpayers, understanding the implications of claiming credits on your tax return is imperative. Tax credits serve as valuable tools for many taxpayers, reducing federal tax liabilities dollar-for-dollar. Some credits, such as the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC), can result in a refund to the taxpayer claiming these credits on their return.
The EITC is aimed at supporting lower-income working families by providing them with a credit for income earned during the year. The amount of the EITC depends on several factors, including the taxpayer’s marital status, number of qualifying children, and annual earnings of the household. The ACTC, another credit designed to assist lower and moderate-income families, is often claimed alongside the EITC. Taxpayers claiming the ACTC must house and provide support to qualifying dependent children and have a minimum amount of earned income throughout the year. By offering these credits in a manner that targets providing assistance to taxpayers with lower incomes, the EITC and ACTC function as valuable tax tools that can result in taxpayers receiving a federal tax refund.
However, it is important to know that claiming one or both credits may cause a taxpayer’s refund to be delayed. The Internal Revenue Service (IRS) recently released an announcement informing taxpayers of important refund timelines for those taxpayers claiming the EITC and ACTC. Legally, the IRS is prohibited from refunding the EITC and ACTC before mid-February. In some cases, more information might be needed by the IRS to properly evaluate and process a taxpayer’s claim for the EITC or ACTC; in these instances, the IRS will send the taxpayer a letter requesting additional information, leading to an additional delay. For those taxpayers who filed their return online with no issues and chose to receive a refund via direct deposit, the IRS estimates EITC and ACTC refunds will be provided by March 2, 2026. Taxpayers can check the status on their refund via their online account or by contacting the IRS.
Tax credits, which reduce tax liability dollar-for-dollar, are important tools that many taxpayers can take advantage of. For more tax planning tips, contact Nick Richards ([email protected]) at Greenspoon Marder.
