How to Communicate Tax Refund Delays to Your Clients

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It’s human nature to want any remuneration right away, especially when it comes to money coming from a government agency. However, the overall message to taxpayers and your clients should be, “Although your federal or state tax refund may be slightly delayed, it is for good reason.”

That “good reason” has to do with fraud. The federal and state taxing agencies are implementing important, new anti-fraud measures to stem the tide of the ever-growing problem of tax refund fraud. If the government doesn’t implement such measures, the opposite result is a lot worse. In the event that your information is stolen and a fraudster has your tax refund issued to them, it could take up to a year for the agency to correct the problem and issue the refund to you.

Internal Revenue Service. The IRS, state agencies and the tax preparation industry collaborated during the recent Security Summit in March 2015, and decided to implement new safeguards and standards to combat stolen identity refund fraud. Through password requirements, account validation and information sharing, the taxpayer’s identity is verified more securely, and tax refund fraud is much less prevalent. The IRS expects to process nine out of 10 federal tax refunds within 21 days, despite having implemented these new anti-fraud measures.

State Taxing Agencies. With the increase in identity theft and tax refund fraud, state taxing agencies are taking extra precautions to make sure tax refunds are going to the taxpayer and not to the criminal. Although this process may slightly delay tax refunds, the taxing agencies are focused on getting it right instead of getting the refunds out the door in a hurry. However, taxpayers may not notice much of a difference at all, while others may be contacted by their state agency to prove their identity by providing a driver’s license or answering ID verification questions.

Some states are notifying the public about possible processing delays, as well as urging employers to quickly file Form W-2s so that the taxpayer’s earnings can be validated. For example, Illinois won’t issue refunds until March in order to implement new security protocols. A new law enacted in Utah prevents refunds from being issued before March 1, unless the employer and employee have filed their required tax forms.

Editor’s Note: Interested in learning more about fraud and security? See our other articles on this topic!