Is Your Tax Refund Forfeited?
Are You Sure You Don’t Have a Tax Refund Due?
Usually when the tax filing due date arrives, most taxpayers breathe a sigh of relief. What most taxpayers don’t realize, that date will close the window for many on their ability to file a claim for a tax refund. READ THIS CAREFULLY: The IRS stated that for the tax year 2017, up to 1.4 million individual taxpayers lost their ability to claim a refund by missing the three year statute.
Those same individuals forfeited $1.35 billion in unclaimed tax refund money. This type of unclaimed refund money goes back to the U.S. Treasury to be spent per the budget. This almost sounds highly unlikely, but it’s true. You could have a refund due or maybe someone you know.
What causes something like this?
These additional monies are often the result of unused refundable tax credits. Usually, most tax credits are used to reduce your tax liability to zero. However, there are other tax credits that not only reduce your tax liability down to zero, but any excess over that amount is refundable to the taxpayer.
The child tax credit, American Opportunity tax credit, and the earned income tax credit, are refundable tax credits. Some taxpayers don’t understand this terminology. They think because they have no tax balance due, they aren’t eligible for a refund, so they don’t take advantage of it.
Also, a lot of tax refund checks are returned back to the IRS because a person moved & didn’t inform the IRS, or perhaps passed away.
Part time workers can lose their refund
Often time students and other part time workers don’t complete the W-4 withholding form correctly, and this results in over withholding of taxes. At the end of the year, many of them didn’t earn enough to be required to file a tax return, so they didn’t. The IRS will only refund that money if you file a tax return.
Seniors can also lose their refund
This same situation also exists for seniors that applies to the part time workers. Many of them have taxes withheld from their retirement pay as well as social security. Their income at the end of the year may not be high enough to file a tax return, but if they don’t file, they forfeit any tax refund they may have coming to them.
Death and disability are another factor
Sometimes when one person in a family files taxes for the entire family, and he/she becomes disabled or passes away, tax returns don’t get filed, and refunds are lost.
Returns on extension become unfiled
Many taxpayers who don’t have all tax information required, place their returns on extension and forget about them, or continue to wait for that needed piece of information. This concern results in unfiled tax returns and lost refunds.
Confusion over the economic impact payments
These payments were sent in multiple rounds and for some, became difficult to keep track of. Many individuals didn’t have to file a tax return because of low income, and didn’t know if their payment amounts were correct or not.
Per IRS regulations, you have a three-year window normally. Actually, you must file a claim or an amended return not later than three years from the original filing date, or two years from the date you paid any tax. Be advised, that the IRS strictly enforces this requirement.
If you miss filing by just one day, chances are you lost the refund forever. At this time, 2018, 2019, and 2020 are open years for a tax refund request by filing an amended return.
For a non-filer, check the tax documentation that you have and look for any taxes withheld. If you find any, filing an amended return may be possible.
If, for whatever reason, you haven’t received any economic impact payments, and you didn’t file a tax return, check out the IRS website at www.irs.gov. They offer some free options where you can file certain information to get those payments.
Be advised too, that there are a few exceptions to the deadlines for filing an amended return to claim a tax refund. However, don’t let that influence the fact that these deadlines are there for a reason. If you had taxes withheld or you haven’t kept your tax filing up to date as you should have, you may be a victim of losing your refund. Act now for the open years of 2018 through 2020.
An accountant and tax preparer by profession, Gust’s true passion lies in his company blog titled “HBS Financial Group, Ltd.”. Through this venue, he not only tries to teach individuals about budgeting, money management, and taxation but he writes the majority of the articles as well.