Don't Mess With Taxes

Photo by GotCredit via Flickr CC

It's hard for most of us to believe, but every year some folks who are due federal tax refunds do not file returns with the Internal Revenue Service.

If they ignore those filings for more than three years, then Uncle Sam gets to keep the money permanently.

Right now, though, the U.S. Treasury is just holding the unclaimed tax refunds — a total of $1.1 billion. That's how much cash the estimated 1 million taxpayers who didn't file a tax year 2014 Form 1040 back in 2015 could be kissing goodbye.

They have until this this year's tax deadline, April 17, to file that old 2014 tax return and get their refunds.

"Time is running out for people who haven't filed tax returns to claim their refunds," warned Acting IRS Commissioner David Kautter. "Students, part-time workers and many others may have overlooked filing for 2014."

Afraid filing this late will cause you problems with the IRS? Don't be. As Kautter pointed out, there's no penalty for filing a late return if you're due a refund.

But wait too long, that's past this year's tax filing deadline for those 2014 returns, and you forfeit the funds.

Smallest, biggest possible checks: While the Uncle Sam will happily take the more than $1 billion in unclaimed tax refund cash, he really would like to clear his 2014 tax year books by distributing the unclaimed refunds to the rightful taxpayers.

That can be a nice chunk of change for some folks.

Of the $1.1 billion sitting in the U.S. Treasury, the median amount of tax year 2014 unclaimed refunds is estimated by the IRS to be $847. That means half of the refunds are more than $847 and half are less.

The smallest median potential refund amount is $723. That amount goes to Idaho's tax year 2014 nonfilers.

Other states where three-year-late filers could get refunds of in the $700 range are

Arizona, California, Colorado, Georgia, Minnesota, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Utah and Wisconsin.

Of course, while $700-plus is, for unclaimed 2014 tax year refund money, on the relatively low side, I sure wouldn't refuse a check that size.

And it just gets better.

Wyoming residents are at the top end of 2014's unclaimed refunds. The median refund check for folks in the Cowboy State who didn't file back then is $973.

This is second consecutive year that Wyoming's nonfilers can claim the biggest potential median refund check. This year, though, nine other states — Connecticut, Massachusetts, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island and West Virginia — also have median refund amounts that are more than $900.

If your state in isn't in $700 or $900 categories, then your median check amount is in the $800 range.

You can see where your state stands in the ol' blog's special web page showing the state-by-state breakout of 2014 tax year unclaimed refunds.

Most negligent, diligent filers: As for actual amounts of nonfilers three years ago, my fellow Texans are once again the least diligent filers.

There were 108,100 of us (but not me!) in 2014 who didn't send the IRS a tax return the following year. Overall, my nonfiling neighbors accounted for nearly $122 million in tax year 2014 unclaimed refunds.

Vermont also was a repeat winner, relatively speaking, as the home to the most conscientious tax filers. Just 2,000 folks there failed to fill out a refund-producing federal tax return three years ago.

Yes, I know that there are a lot more people living in Texas than in Vermont, so the raw numbers are not necessarily the best gauge of federal tax filing habits. But those are the figures the IRS provides.

Why folks don't file: Sometimes people get busy and simply don't get around to sending their returns to the IRS. Others think their refund is too small to mess with filing a 1040. (If that's you, let's talk!)

Some people don't even know they might be due a refund. That's why even if you aren't legally required to do so, it's sometimes a good idea to file a tax return anyway.

Whatever the reason, the IRS wants you to come and get your cash and soon.

Three-year window closing: But you have to do so by April 17, 2018.

The deadline is not just the IRS setting a due date. It's the law, which says that if no return is filed to claim a refund within three years, the money becomes the property of the U.S. Treasury.

Since 2014 returns were due in April 2015, that three-year filing window closes forever on 2018's tax due date.

By then, 2014 forms must be filled out — by hand as there's no e-filing of old returns — properly addressed and in the U.S. Postal system in time to be postmarked by April 17.

Finding the old forms: You can download prior year tax forms (Forms 1040, 1040A and 1040EZ) and instructions at IRS.gov's forms and publications page or call toll-free (800) 829-3676.

If you need old W-2, 1098, 1099 or 5498 forms to fill out your 2014 tax return, request copies from your employer, bank or other payer.

If you can't get these documents that way, try the IRS' Get Transcript Online tool to obtain a Wage and Income transcript. You also can file Form 4506-T to request a transcript of 2014 income and use that information to file the old tax return.

Also double check that you filed your taxes for the 2015 and 2016 tax years. If you didn't, your belated 2014 refund claim might be held.

In addition, your old refund amount could be reduced if you owe any amounts to the IRS or other federal agencies, such as for a student loan, as well as have debts to a state tax agency for such things as unpaid child support.

Annual issue: As unbelievable as it may sound, unclaimed tax refunds are common. I've been writing about this tax phenomenon as long as I've been blogging.

You can see what the numbers were in prior years in my previous posts on nonfilers due refunds —

1. 2017 in connection with unfiled 2013 returns;
2. 2016 in connection with unfiled 2012 returns;
3. 2015 in connection with unfiled 2011 returns;
4. 2014 in connection with unfiled 2010 returns;
5. 2013 in connection with unfiled 2009 returns;
6. 2012 in connection with unfiled 2008 returns;
7. 2011 in connection with unfiled 2007 returns;
8. 2010 in connection with unfiled 2006 returns;
9. 2009 in connection with unfiled 2005 returns;
10. 2008 in connection with unfiled 2004 returns;
11. 2007 in connection with unfiled 2003 returns; and
12. 2006 in connection with unfiled 2002 returns.

And if in 2014 you lived in a state that has an income tax, chances are that if you overlooked your IRS filing, you also missed sending in your state return. Check with your state tax department about what you need to do about that oversight.

Yeah, I know you're working on your current tax return now. But if you didn't file back in 2014, the extra (and old!) tax-filing work could really pay off.