Poorest Taxpayers Caught In Bind Taxpayers Qualifying For Earned Income Credit Face Long Delays Because Of New Irs Efforts To Eliminate Fraud
FOR THE RECORD: Saturday, March 18, 1995 CORRECTION: The IRS usually takes a week to 10 days to issue a refund check when a taxpayer proves the money is needed because of financial hardship. Also, the IRS does not charge taxpayers when they file a return electronically. A story in the March 5 Spokesman-Review indicated otherwise.
Spokane and North Idaho taxpayers waiting for Earned Income Credit refunds from the Internal Revenue Service may be waiting a long time.
The IRS’s efforts to police tax fraud have dramatically slowed the refund checks of the people who need that money the most.
The constipated refunding process has tax preparers in Spokane and across the country weeping into their 1040s.
The IRS means well, its representatives say. An ambitious program to squelch tax fraud means that the service will scrutinize far more returns than they ever have before.
But for low-income working families who qualify for the Earned Income Credit, the IRS’s new vigilance means their refund could be delayed months.
That’s a lot to ask of Earned Income Credit recipients, who qualify for the refund because they live on the financial edge.
Just ask 19-year-old Jeannine Dixon in Medical Lake. Recently laid off, pregnant and with a 2-yearold, she was counting on a more than $1,000 refund from the government.
But a letter she received a few weeks ago from the IRS said the money won’t be there until sometime in April.
“My 2-year-old’s birthday is next week, and we don’t have a dime for her,” she said. “It just isn’t fair.”
Families who earn between $9,000 and $23,000 can qualify for a credit of between $300 and $2,500 depending on how many children they have. Those with two or more children can get the highest credit of $2,500.
Last year in Washington state, 217,000 taxpayers asked for the Earned Income Credit out of 1.9 million individual returns.
In Idaho, 59,616 taxpayers out of 516,277 asked for the credit last year, said Merry Trudeau of the Boise District IRS office.
The IRS figures it can collar $5 billion in fraudulent claims for the Earned Income Credit by examining many of the returns that claim it, said Judy Monahan of the Seattle IRS District office.
That means if you’re claiming the credit and the IRS picks your return to make sure that your Social Security numbers match your name and your children’s names, your check will sit for up to six months.
“It’s just not fair, and they didn’t even warn us about this,” Dixon said. “If they’d just told us it was going to be this long for the money, we could have budgeted differently.”
The new tax return scrutiny has become a nightmare for local H&R; Block outlets, which serve many lowand middle-income taxpayers.
“This is the worst tax season ever,” groans Marty Evans, the district manager for H&R; Block tax preparation offices all around Spokane. “I’ve been at it 17 years, and it’s never, ever been this bad.”
Dozens of customers are livid about the slow refunds, Evans said. For one man, it meant eviction for his family from their apartment because they had counted on the refund check to pay rent, Evans said.
IRS officials calmly tell frustrated taxpayers to call the 1-800-829-1040 tax information number, where IRS consultants will try to expedite the refund.
Trudeau of the IRS’s Boise District office said that if taxpayers can prove a hardship situation that requires they get the money now, the refund can be sent out as soon as the next day.
But Evans just sighs and explains that one H&R; customer spent five hours constantly dialing the number before he got through.
Dixon in Medical Lake tried to call the number, and two hours later finally got through. “The first question they ask you is was the line busy when you tried it,” she said. “What do they think?”
To prove hardship, taxpayers who are lucky enough to get through the phone line talk with an IRS staffer about their financial situation and try to prove that they need the refund now.
They must explain to the IRS on the phone that they face legal action or eviction, and must be willing to send documents supporting the hardship, Monahan said. The IRS can try to resolve the questions that are holding up the refund on the phone, but there is no guarantee that the process will be sped up, Evans said.
“And even if you prove hardship - which is not easy - that doesn’t mean they’ll send the money out immediately,” Evans said.
The IRS is now checking information that it has never thoroughly checked before, said Monahan in Seattle. The revenue service will cross check what the return says with what the Social Security records show, she said.
“So if someone gets married and never bothers to change her name on her Social Security card, the return gets flagged and will have to be reverified,” Monahan said. “That’s where the delay comes in.”
All told, one in six returns will take the scenic route in the IRS maze before the government mails a refund check.
All these new checks on returns are added to the usual random audits and examinations the service does. “We’re protecting taxpayers money here, and it’s damned if we do try to stop the fraud, and damned if we don’t,” Monahan said. “When we try to stop it and slow processing down, people yell at us, but then we get criticized if we don’t try.”
One quicker way through the new IRS logjam is to file your return electronically, Evans said.
You can pay the IRS $35 to have them input your return electronically or pay your tax preparer do it for you. If you have a personal computer and a modem, you can buy a software program to file your taxes, though it often isn’t as simple as it sounds.
If the IRS flags an electronically filed return, the longest delays for a refund check are about six weeks, according to the IRS’s own estimates.
“If they have any questions about what is in your return, you’ll know much, much faster if you file electronically,” Evans said. “If there’s going to be a problem, you’ll know immediately.”
But for many counting on the Earned Income Credit, they hear only silence from the IRS. Most will receive notice from the IRS in the mail that their credit money has been held up, Trudeau said.
The longest most Spokane and North Idaho have had their refunds delayed has been two months, Evans said. But depending on the kind of return, it could take longer.
At Spokane’s Consumer Credit Counseling office, a few customers have had problems making payments because of delayed refund checks, said Linda Johnson, office manager.
Evans expects things to only worsen as tax season heats up, though the early filers his staff has dealt with are usually the ones who need the money the most.
“There isn’t a single tax preparer out there that isn’t having an awful time with all of this,” he said.
For Jeannine Dixon, getting her earned income credit means staying ahead of her creditors.
“We were counting on that money for our bills,” she said. “Now, they tell us we won’t get the money for another nine weeks. Now we’re just looking to get by and saving every penny.”