Refund Delays for taxpayers who claim the Earned Income Credit
The IRS is "Where is my Refund" tool is showing delays to EIC refunds based on Code 1121.
Basically the IRS is doing some additional fraud prevention and reviewing these returns more closely. This is delaying the refund for the taxpayer. According to Kelly Phillips who has spoken to the IRS and Intuit (the maker of Turbo Tax) the delays appear to be solely due to the IRS increased scrutiny of the tax credit.
The EIC has be the subject of much abuse over the years. Including people claiming to be single (instead of married) in order to get a bigger credit, the sharing of children with other tax payers to get a bigger credit, etc. The governments internal auditors have found many instances of fraud. Last year the IRS put more burden on the tax preparer by asking us to gather evidence that the children live with the taxpayer such as School Records. I expect this area of the tax code to increase each year as the IRS attempts to weed out the fraud.