What exactly is the Protecting Americans against Tax Hikes (PATH) Act? Is it effective?

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What exactly is the Protecting Americans against Tax Hikes (PATH) Act? Is it effective?

In: Economics

Anonymous 0 Comments

Full disclosure, this is all based on just reading the notice on the IRS website.

The first thing to understand is that the title of the act has basically nothing to do with its content. It appears to me to be a compromise bill. On the one hand, it expands some existing tax credits, especially the Work Opportunity Tax Credit that gives employers incentives to hire veterans, ex-cons, and the long-term unemployed. On the other hand, it mandates that certain other tax credits, especially the EITC, be processed slower at the IRS. Under the law, tax returns claiming the EITC can’t be completed until 2/15.

The stated purpose is to give the IRS more time to reduce fraud in those claims. Determining the actual rate of fraud appears to be a difficult and contentious problem, and all the top Google results I skimmed disagreed on measurement methodology and what proportion of errors to attribute to honest mistakes. I definitely couldn’t find anything that tracked the error rate before and after PATH.