{"id":22145,"date":"2016-10-20T19:54:40","date_gmt":"2016-10-20T19:54:40","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/newsroom\/penalties-for-tax-mistakes-more-costly-due-to-the-path-act\/"},"modified":"2023-03-01T13:49:42","modified_gmt":"2023-03-01T19:49:42","slug":"tax-penalty-costly-for-filing-mistakes-due-to-path-act","status":"publish","type":"newsroom","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/irs\/tax-responsibilities\/tax-penalty-costly-for-filing-mistakes-due-to-path-act\/","title":{"rendered":"Penalties for tax mistakes more costly due to the PATH Act"},"content":{"rendered":"<h3 class=\"title_summary\">Summary<\/h3>\n<ul>\n<li>This continues the H&amp;R Block newsroom\u2019s series on the Protecting Americans from Tax Hikes (PATH) Act, which made dozens of changes to the tax code. The PATH Act series covers its\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-center\/newsroom\/irs\/tax-law-and-policy\/path-act-new-permanent-taxable-benefits\/\">permanent extensions of many tax benefits<\/a>, the\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-center\/newsroom\/irs\/tax-law-and-policy\/itin-holders-required-to-renew\/\">renewal requirements for Individual Taxpayer Identification Numbers (ITINs)<\/a>,\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-center\/newsroom\/irs\/tax-law-and-policy\/path-act-enforces-new-rules\/\">eligibility changes for certain tax credits<\/a>,\u00a0its\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-center\/newsroom\/irs\/tax-law-and-policy\/path-act-tax-savings-and-benefits\/\">expansion\u00a0of other tax benefits<\/a>, its increasing cost of making mistakes, its impact on small business and its delay of millions of refunds until February 15.<\/li>\n<li>The\u00a0<a href=\"https:\/\/www.hrblock.com\/tax-center\/media-kit\/path-act-tax-impact\/\">PATH Act tax impact<\/a>\u00a0resource guide provides information to help media and consumers.<\/li>\n<\/ul>\n<p>Not all tax credits are created equal. Refundable tax credits are particularly valuable because an eligible person can still get the credit even if they do not owe or have to pay income taxes. But this also means <a href=\"https:\/\/www.hrblock.com\/tax-center\/newsroom\/irs\/tax-fraud\/how-to-deal-with-tax-identity-theft\/\">refundable credits are target rich for tax identity thieves<\/a>. In fact, the <a href=\"https:\/\/paymentaccuracy.gov\/high-priority-programs\">earned income tax credit (EITC) has one of the highest improper payment rates<\/a> of the 16 \u201chigh-error\u201d programs identified by the government. So when the Protecting Americans from Tax Hikes (PATH) Act made dozens of changes to the tax code, some of those changes included implementing stiffer penalties for improper claims of refundable credits.<\/p>\n<p>Improperly claiming the EITC resulted in some serious consequences even prior to the PATH Act. Recklessly or intentionally disregarding the rules can get a taxpayer barred from claiming the credit for two years. If they are determined to have fraudulently claimed the EITC, that ban stretches to 10 years.<\/p>\n<p>The PATH Act extended those bans to apply to the American opportunity credit (AOC) and the child tax credit (CTC), two other valuable and popular credits that may be partly or fully refundable. The PATH Act also gave the IRS \u201cmath error authority\u201d for these credits.<\/p>\n<p>\u201cHaving \u2018math error authority\u2019 means the IRS can take action on certain tax return errors without a formal audit of an affected taxpayer,\u201d said Kathy Pickering, vice president and executive director of The Tax Institute at H&amp;R Block. \u201cTaxpayers need to be careful to meet the requirements and substantiate their eligibility. This is especially true of the EITC, which is a complex credit that taxpayers may not be eligible for every year.\u201d<\/p>\n<p>Once their ban expires, affected taxpayers will have to provide additional information to the IRS before being allowed to claim the credit again.<\/p>\n<p>The PATH Act also gave the IRS the authority to assess a 20 percent penalty for incorrect claims of refundable credits like the EITC, AOC or CTC.<\/p>\n<p>\u201cThe 20 percent accuracy-related penalty previously applied to cases of substantial underpayment or negligence, which are not likely to impact taxpayers who do their due diligence. But now anyone who incorrectly claims a refundable credit would not just be denied the credit, but could pay a 20 percent penalty on the amount they tried to claim,\u201d said Pickering.<\/p>\n<p>Pickering says these expanded penalties and enforcement provisions should not deter taxpayers who have a right to these credits from taking them.<\/p>\n<p>\u201cMy advice to taxpayers is to take all the tax benefits they are eligible for. If in doubt, don\u2019t just forgo the tax credit. Do your homework on the IRS website or talk to a tax professional, who can help you determine if you are eligible and what information you need to substantiate your tax return. Just like you don\u2019t want to face these penalties, you also don\u2019t want to leave money on the table,\u201d said Pickering.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Summary This continues the H&amp;R Block newsroom\u2019s series on the Protecting Americans from Tax Hikes (PATH) Act, which made dozens of changes to the tax code. The PATH Act series covers its\u00a0permanent extensions of many tax benefits, the\u00a0renewal requirements for Individual Taxpayer Identification Numbers (ITINs),\u00a0eligibility changes for certain tax credits,\u00a0its\u00a0expansion\u00a0of other tax benefits, its increasing [&hellip;]<\/p>\n","protected":false},"author":418,"featured_media":26868,"menu_order":0,"template":"","tags":[7320],"news-categories":[23363,23374],"class_list":["post-22145","newsroom","type-newsroom","status-publish","has-post-thumbnail","hentry","tag-path-act","news-categories-irs","news-categories-tax-responsibilities"],"acf":{"post_rest_thumbnail_alt_id":null},"yoast_head":"<title>PATH Act expands penalty for filing mistakes | H&amp;R Block Newsroom<\/title>\n<meta name=\"description\" content=\"Note that all tax credits are not created equal. 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