Protecting Americans From Tax Hikes PATH Act: Definition

Path Act Tax Related Provisions

The PATH Act retroactively extends the deduction for two years to property placed in service before January 1, 2017.SeeIRC § 179D, as amended by PATH Act § 190. The PATH Act extends 50% first-year bonus depreciation for three years so that it applies to qualified property acquired and placed in service before January 1, 2018. First-year bonus depreciation is then reduced to 40% and 30% for qualified property placed in service in 2018 and 2019, respectively.SeeIRC § 168, as amended by PATH Act § 143. For example, the PATH Act only provided a temporary extension of 50 percent bonus depreciation, much like the 2017 TCJA provided temporary 100 percent bonus depreciation. Instead, 100 percent bonus depreciation should be a permanent feature of the tax code. As such, it would permanently reduce the cost of capital, incentivizing a higher level of investment and economic output.

Path Act Tax Related Provisions

The deduction is capped at $4,000 for taxpayers whose adjusted gross income doesn’t exceed $65,000 ($130,000 for joint filers) or, for those beyond those amounts, $2,000 for taxpayers whose AGI doesn’t exceed $80,000 ($160,000 for joint filers). Second, the new legislation was put into effect in response to broad concerns around tax errors and tax fraud, and was not targeted at specific groups of EITC claimants.

Protecting Americans from Tax Hikes Act of 2015

Mistakes of $100 or less ($25 or less if WH) will be relieved of issuing corrections unless the recipient requests that a corrected statement be issued to IRS. Barr MS. An inclusive, progressive national savings and financial services policy. Bonus depreciation allows firms to deduct a larger portion of certain “short-lived” investments in new or improved technology, equipment, or buildings, in the first year. Allowing businesses to write off more investments partially alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. If you have a simple tax return, you can file for free with TurboTax Free Edition or TurboTax Live Assisted Basic. You can also file with TurboTax Live Full Service Basic at the listed price.

What Is the PATH Act?

The Protecting Americans from Tax Hikes (PATH) Act was legislation passed in 2015 that made specific changes to tax laws.

Just like EITC claims, paid preparers will now face due diligence penalties of $500 for CTC and AOTC claims, and that starts right now! IRS has been fighting for proof of payments since October 2006 when they announced that 1098-Ts were NOT source documents, and could NOT be relied upon whenever the “amount billed” column is used. The cancellation of debt exclusion for Qualified Personal Residences is extended through 2016 and will include those transactions entered into in 2016 but not completed until 2017. Rauh VA, Whyatt RM, Garfinkel R, Andrews H, Hoepner L, Reyes A, Diaz D, Camann D, Perera FP. Developmental effects of exposure to environmental tobacco smoke and material hardship among inner-city children. A renewable electricity production credit is allowed for the production of electricity from qualified energy resources at qualified facilities. Prior to the PATH Act, the construction of a qualifying facility had to begin before January 1, 2015 in order to qualify for the credit. The PATH Act retroactively extends the date by which construction of a qualifying facility must begin for two years to December 31, 2016.SeeIRC § 45, as amended by PATH Act § 187.

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The provision allows a credit of 10% of expenditures for qualified energy improvements, up to a lifetime limit of $500. This provision expands the current law procedures for the Tax Court to consider small tax cases where the amount in dispute is under $50,000 to include the review of IRS decisions not to abate interest. Section 346 ~ This provision allows motion picture payroll services companies to be treated as the employer of their film and television production workers for Federal employment tax purposes.

Efforts to raise lower-income tax filer’s awareness of potential delays could take place through companies participating in the IRS’ Free File Alliance, community-based organizations, faith communities, companies sponsoring Volunteer Income Tax Assistance sites, and local departments of social services. Employers could also include brief informational messages about PATH Act refund delays with their annual communication about W2 form availability prior to tax season. First, tax filing patterns appeared similar in 2016 and 2017, signalling the lack of changes in filing behaviours among tax filers after the new reform. Second, the incidence of food insecurity increased among early EITC filers relative to later EITC filers following the implementation of the PATH Act. The magnitude of these negative effects appeared larger for households with greater financial vulnerability. Given the statutory intent of the EITC to boost incomes and lift families out of poverty, our findings can help policymakers assess the tradeoffs between this goal and their aim to eliminate fraud and errors and reduce improper payments.


Section 302 ~ 529 plan distributions may be used to pay for computer equipment and technology. Certain tuition refunds may be rolled back into the 529 plan if completed within 60 days of receipt. Section 202 ~ Safe harbor for de minimis errors on information returns and payee statements. Mistakes of $100 or less ($25 or less if WH) will be relieved of issuing corrections unless the recipient requests a corrected statement be issued to IRS. The exclusion from Cancellation of Debt Income for the Qualified Principal Residence Indebtedness is extended through 2016 and will include debts discharged in 2017 if written agreement was entered into in 2016. Extension of reduction in S-corporation recognition period for built-in gains tax. This provision also permanently extends the rule that eliminates such gain as an AMT preference item.

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Beginning in 2017, the PATH Act also instituted additional safeguards against fraudulent or erroneous claims of the EITC and ACTC on tax returns , which included an additional review period to verify the wages reported on any tax returns claiming the EITC and ACTC. Whereas previously the IRS sent most tax refunds to households 7 to 10 days after tax filing, the PATH Act resulted in the IRS holding the entirety of the tax refund for EITC and ACTC claimants until at least February 15 of the 2017 tax season. However, even though February 15 was the earliest date by which the IRS would release refunds for EITC and ACTC claimants, tax filers were instructed to not expect their refunds until at least the week of February 27 .

For 2009 through 2017, the EITC amount has been temporarily increased for those with three children and the EITC marriage penalty has been reduced by increasing the income phase-out range by $5,000 for those who are married and filing jointly. Tax refunds can be especially valuable for lower-income households due to the receipt of the federal EITC, which functionally operates as a wage subsidy for these households. For example, in the 2019 tax year, the maximum benefit for a Head of Household filer with three or more children and $ in employment income was $6,557, or 44% of their earned income. Because it comprises such a substantial proportion of their yearly income, EITC-eligible Path Act Tax Related Provisions recipients often file their annual tax returns as early as possible. For the first time in 2017, many early filers—more than half of those claiming the EITC and Child Tax Credit —will wait longer for their refunds. The Protecting Americans from Tax Hikes Act of 2015, which made provisions of the EITC permanent, also required the Internal Revenue Service to delay tax refunds for those claiming the EITC or the refundable portion of the CTC until at least February 15 in an effort to verify wages and reduce errors. A new report by the Urban Institute found that delaying tax refunds will likely lead to increased financial hardship for these hardworking families.

The PATH Act contained provisions that retroactively restored and extended a large number of expired tax provisions, commonly known as “tax extenders.” These extenders, which had expired prior to 2015, were retroactively restored effective January 1, 2015. While some provisions have been extended permanently, others have been extended only temporarily. The omnibus also contained several important income and excise tax provisions (e.g., certain excise taxes required under the Affordable Care Act were delayed or temporarily suspended). These provisions are forecasted to generate savings, as the Joint Committee on Taxation projects that they will bring forth $4.5 billion in savings over a 10-year window.1However, immigrants also generate billions of dollars per year in tax revenue, often through filing with ITINs.

Delaying Tax Refunds Hurts Hardworking Families

Remember, with TurboTax, we’ll ask you simple questions to maximize your tax deductions. We’ll automatically apply these credits if you’re eligible and do the calculations for you. The PATH Act changed this, so you can no longer claim the EITC retroactively for years when you did not have a valid SSN. If you were counting on those retroactive refunds to bolster your tax return, you may be looking at a smaller refund than expected. IRS Publication 972 provides instructions for parents and guardians of children under age 17 on how to claim the child tax credit. The American Rescue Plan, passed in 2020 to relieve taxpayers harmed economically by the COVID-19 pandemic, extended the Child Tax Credit to many more American Families and increased the size of the payments.

  • Our work, by contrast, investigates the realized impacts of even modest delays in the expected large, lump sum payments offered by the tax refund on an array of household outcomes, including the experience of financial and medical hardships, food insecurity, and debt accrual.
  • The Protecting Americans from Tax Hikes Act was legislation passed in 2015 that made specific changes to tax laws.
  • On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015.
  • However, the PATH Act stipulates that the IRS must withhold refunds for filers who claim these tax credits until February 15.