PATH (Protecting Americans From Hikes in Taxes) Act : The Protecting Americans from Tax Hikes (PATH) Act of 2015 was enacted to safeguard taxpayers and their families from tax fraud while also permanently extending various tax rules that were set to expire.
The law has an impact on the timing of some refunds for tax returns filed before February 15 each year.
The PATH Act also extended the Work Opportunity Tax Credit (WOTC) retrospectively, added a new wrongful-incarceration exception, and forced some taxpayers to renew their Individual Taxpayer Identification Numbers (ITINs) (ITIN).
The Protecting Americans from Tax Hikes (PATH) Act of 2015 makes tax law amendments to renew several expired legislation and protect taxpayers from fraud.
Some taxpayer credits for people and businesses are affected by the PATH Act.
Taxpayers who file for the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) early in the year may have to wait until after February 15 to receive their refund under the PATH Act.
The Work Opportunity Tax Credit (WOTC), a credit for firms who hire individuals from target groups who have continuously faced employment hurdles, is extended retrospectively under the PATH Act.
The PATH Act: An Overview
By extending expiring tax laws and adding new regulations to minimise fraud, the PATH Act was created to ensure that all Americans receive the correct refund from the Internal Revenue Service (IRS).
In many circumstances, the PATH Act has no effect on the amount or timeliness of a refund received by an individual or family.
Certain tax incentives, on the other hand, are now being scrutinised more rigorously.
Additional Child Tax Credit (ACTC) or Earned Income Tax Credit (EITC) (ACTC)
The PATH Act has made no changes to the tax filing process. The IRS intends to distribute refund cheques within 21 days in most cases, as it has in previous years.
The IRS will hold your refund check until February 15 if you file an Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) return early in the year.
This means your reimbursement may not arrive until late February.
Early filers may face a refund delay to give the IRS more time to identify bogus claims and prevent refunds from being given to identity thieves.
The EITC benefits low- and middle-income families, particularly those with children.
The number of children determines the amount of tax credits available.
The ACTC eligibility requirement is $2,500 in earned income.
If you don’t qualify for the EITC or ACTC, or if you file your taxes after February 15, the PATH Act has no impact on the timeliness of your refund.
Tax Provisions Expanded and New
The PATH Act, which affects both individuals and corporations, renews numerous outdated tax rules and introduces a few new ones.
Many tax deductions that were slated to expire in 2015 were extended with retroactive credit, including tuition deductions, charitable contributions, and home energy credits.
The changes/extensions to the PATH Act for individuals and corporations are listed below.
The Work Opportunity Tax Credit has been extended (WOTC)
Employers who recruit people from certain target groups who have previously faced impediments to employment may be eligible for a Work Opportunity Tax Credit (WOTC).
For workers hired on or after January 1, 2015, the PATH Act extended WOTC eligibility retrospectively.
The WOTC is divided into nine categories, with an additional category for long-term unemployed people hired after January 1, 2016.
Exclusion for Wrongful Incarceration
The PATH Act has an exclusion that gives an eligible wrongly incarcerated person a one-year window to make refund claims for restitution or monetary judgments (including civil damages) received and reported in a previous tax year.
According to the IRS’s “Wrongful Incarceration FAQs,” the PATH Act exempts wrongfully incarcerated individuals from having to report any monetary awards related to their wrongful incarceration as income.
Individual Taxpayer Identification Number Renewal (ITIN)
Beginning in October 2016, the PATH Act requires certain taxpayers to renew their Individual Taxpayer Identification Number (ITIN).
In order to use their ITIN, taxpayers who have not used it on a federal tax return at least once in the prior three years must renew it.
Using an expired ITIN may result in a delay in receiving a refund or in being ineligible for tax credits.
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