PATH Act 2019 Impact

How does the PATH Act impact 2019? PATH Act 2019 Information

We have been getting this question a lot lately. How will the PATH Act impact my 2018 Tax Return in 2019? PATH Act 2019 Impact.

Before we answer this question, lets understand exactly what is the PATH Act.

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was enacted December 18, 2015, and contains more than 100 provisions, several of which change the tax law to the benefit of taxpayers and their families. It includes $620 billion in tax reductions for families and businesses, extending specific tax provisions, and includes elements designed to protect Americans against identity theft and tax fraud. This new law requires issuers of W-2s and 1099-MISC and 1099-Rs to submit forms to the Social Security Administration by 1/31/17. It also gives the IRS more time to review returns with specific tax credits, like theEarned Income Tax Credit (EITC)and the Additional Child Tax Credit (ACTC), and to compare Forms W2 and 1099 from the payers against the individual tax return.

In good news for low and middle income tax payers, the PATH Act has made permanent the expansions to both the EITC and the child tax credits.

The Good that came from the PATH Act:

Permanent Expansion of EITC

The EITC was created in 1975 by the Ford Administration to help offset the regressive nature of Social Security payroll taxes. Every worker who earns a taxable wage is required to contribute a portion of each paycheck to Social Security up to a certain wage ceiling (which is $118,500 for 2016). If someone earns more than the wage base, the additional income is not subject to Social Security tax.

The EITC was created to diminish the greater burden this places on taxpayers with an earned income below a specific amount. In 2016, this was less than $53,930. Over the years, the EITC has been expanded and, in the most recent expansion, the credit was made more generous for married couples and taxpayers with three or more children. The PATH Act makes these expansions, which were set to expire in 2018, permanent.

Permanent Expansion of CTC

The Child Tax Credit (CTC) is a nonrefundable tax credit designed to help working families with the cost of raising children. The Additional Child Tax Credit (ACTC) is the refundable portion of the CTC. If a taxpayer claims the nonrefundable CTC but can’t use the full amount, they may also be able to claim the refundable ACTC, if their earned income is more than $3,000. The PATH Act made permanent the expansion of the ACTC to families making more than $3,000.

EIC Related Penalties Apply to CTC/ACTC and the American Opportunity Tax Credit (AOTC)
The PATH Act contained provisions that will affect individuals who claim CTC/ACTC and AOTC beginning with the 2016 tax year:

You can no longer file an amended return to claim CTC/ACTC/AOTC for prior years that a taxpayer, spouse, or qualifying child did not have an Individual Tax Identification Number (ITIN).
The CTC/ACTC/AOTC are now subject to the penalty for erroneous claims for refunds and credits, similar to EITC
Incorrectly claimed refundable credits will now be taken into account when determining the underpayment penalty.
The IRS can bar a taxpayer from claiming the CTC/ACTC and AOTC for two years if a claim is found to be negligent and ten years of a claim is found to be fraudulent.

The bad that came from the PATH Act:

Delayed 2019 Tax Refunds

The PATH Act could really affect early filers who count on getting their refund as early as possible. Because of the efforts made to combat identity theft, the PATH ACT allows the IRS additional time to review returns claiming the EITC and ACTC and therefore, for tax returns that contain those credits, refunds be funded no earlier than February 15, 2017.

Will PATH Act 2019 Impact my tax refund date?

Yes, your tax return will be delayed until February 15th, 2019 or later. This law is in affect from 2017 on. Source.

Source. House PDF: House PATH Act