Don't Mess With Taxes

Photo by Karolina Grabowska

Millions of U.S. taxpayers are concentrating right now on their current tax return filing. But another sizeable group who didn't older returns also have some tax work to do.

Almost 940,000 people across the nation have unclaimed refunds for tax year 2020. They missed out on that money because they didn't file a Form 1040 back in May 2021.

They still have time to collect their part of the just more than $1 billion in old unclaimed refunds, but it's running out. The Internal Revenue Service says the median old, unclaimed refund amount from three years ago is $932.

But to get that much, or possibly more, the nonfilers must submit a 2020 tax year return to the IRS by May 17, 2024.

If they miss the upcoming filing deadline, then the U.S. Treasury gets to keep their money.

3-year window's opening and closing: Federal tax law gives taxpayers three years to file a return and collect the associated refund. The three-year filing period is from the original return's due date, which usually is April 15 or the next business day when Tax Day falls on a weekend or holiday.

But Tax Day in 2021 was unusual due to, you got it, the COVID-19 pandemic. The filing deadline three years ago for the submission of 2020 returns was May 17, 2021.

Since the law starts the three-year claiming deadline on the tax due date, not strictly three calendar years, as noted in Notice 2023-21, taxpayers who didn't file in 2021 and left their 2020 refund money sitting in the U.S. Treasury account have until May 17, 2024 to claim it.

Again, tax law also says if you don't claim your old refund within the three-year filing window, Uncle Sam gets to keep your money. All of it. Totally and forever.

So don't push that deadline to the last minute. That's not just my advice. It's also the recommendation of the head of the IRS.

"We want taxpayers to claim these refunds, but time is running out for people who may have overlooked or forgotten about these refunds," said IRS Commissioner Danny Werfel in a statement about the unclaimed 2020 tax year refunds. "There's a May 17 deadline to file these returns so taxpayers should start soon to make sure they don't miss out."

$932 median unclaimed tax amounts: Now that the timing matters settled, it's time to get to the really important issue, the money.

The payouts from the $1,037,161,300 unclaimed refund total could be a nice chunk of change for each owed taxpayer.

The IRS says the median unclaimed potential refunds for 2020 is $932.

Your unclaimed amount, however, might be more, since that's just the midpoint for the potential old refunds. So half of the waiting refunds are less and, fingers crossed, half of them are more than $932.

Why people don't file: These old, unclaimed tax refunds are not a new occurrence.

Every year, the IRS announces that three years earlier, millions of folks didn't file tax returns that could net them billions in refunds and therefore didn't get that tax cash they were due back then.

There are many reasons for such oversights.

Sometimes people get busy and simply don't get around to sending their returns to the IRS.

Some don't realize they need to file at all. That's often the case with students and, during the coronavirus' economic disruptions, gig workers who took the sporadic jobs to make up for regular income lost when their full-time employer cut back.

In these cases, these folks aren't in the main, traditional job earning pools, so filing is not necessarily routine for them.

Others know they are due a refund, but for some crazy reason (yes, I am judging!) think the amount is too small to mess with filing a 1040. If that's you, we need to talk.

And 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.

Don't forget about the EITC: One of those reasons to file even if you don't have to is to claim any tax breaks for which you qualify. For many, that's the Earned Income Tax Credit (EITC).

This tax credit — which reduces any taxes you owe dollar-for-dollar and is refundable, meaning you'll get money back even if you don't owe taxes — is available to lower- and middle-income taxpayers.

For the 2020 tax year, the EITC was worth a maximum $6,660. Even if you don't qualify for that amount, it still could be worth claiming your possible reduced EITC amount as long as your 2020 income met the tax credit's earnings thresholds.

Back in 2020, you could claim the EITC if your income was less than —

• $50,594 ($56,844 if married filing jointly) for those with three or more qualifying children;
• $47,440 ($53,330 if married filing jointly) for people with two qualifying children;
• $41,756 ($47,646 if married filing jointly) for those with one qualifying child, and;
• $15,820 ($21,710 if married filing jointly) for people without qualifying children.

If your income and family circumstances back in 2020 allow you to claim the EITC on your late-filed return now, then definitely file and claim it by this May 17.

What forms, how to file them: OK, you double-checked your tax records and discovered you didn't file back in 2021. And it looks like you missed out on some cash, even without the EITC.

But just how do you get that old refund?

It's going to take a little bit of work. You'll have to fill out that old form by hand instead of using tax prep software. Yep, that's right. Snail mail is required. There's no e-filing of old forms.

Start by getting tax year 2020 forms. They're available at IRS.gov's online forms and instructions page. Once there, click on the Find prior years forms, instructions & publications link in the "Other Options" section right at top of the page. Then download the documents. You also can call toll-free 1-800-TAX-FORM (1-800-829-3676).

In addition to the proper 2020 tax year forms to file, you'll also need your old tax documents with the information necessary to complete the three-year-old return.

If you don't have the old copies in your personal files, the IRS recommends you first try to get replicas from your employer, bank, or other payer.

If you can't get those informational documents from those sources, you can order a free wage and income transcript by using the IRS' online tool at the Get Your Tax Record web page. There you'll find a link to the IRS' Get Transcript Online tool. A wage and income transcript shows data from information returns received by the IRS, such as the aforementioned forms, and that transcript information can be used to file your old tax return. For many, a transcript is the quickest and easiest option.

If you don't have online access or are just more comfortable using paper, you can file Form 4506-T to request a wage and income transcript. But do so soon. Written transcript requests can take several weeks to fulfill.

Also note that tax year 2020 returns must be filed with the IRS center listed on the last page of the current Form 1040 instructions. Some IRS locations have moved or been closed in the intervening years, so if you use the information on old forms, your finally-filed old return won't make it to the tax agency.

Other non-filing years matter: While you're at it, you also might want to look at other tax years when you didn't file.

The IRS notes that if you're claiming your 2020 tax refund, that amount may be held if you also missed filing returns for 2021 and 2022.

Also be aware of any other amounts you currently owe the IRS, other federal programs, or state agencies. Your old 2020 tax refund may be used to offset currently unpaid child support or past due federal debts, such as student loans.

But look on the bright side. If you're due a refund from 2020, the IRS also might be holding onto unclaimed refunds for you for subsequent tax years, too. You don't have to wait until the last-minute, three-years-down-the-road deadline to claim them.

Don't forget state taxes: Most U.S. taxpayers live in states that also collect income taxes.

That means chances are good that a large percentage of folks who didn't file a federal return in 2020 also overlooked their state returns that year, since state and federal filings typically are connected.

Check with your state tax department about what you need to do about any old unfiled tax return at that level. It might get you even more refund money.

Yes, it's extra tax work. But for me, it's always worth getting some unexpected money. And it's doubly worth it to keep it from belonging to the government.

State-specific federal 2020 refunds: As noted earlier, the median return from the $1+ billion waiting in the U.S. Treasury is $932. That means that half of the old unclaimed refunds are less than $932 and half are more. In some cases, much more.

That's the case in New York, with a median unclaimed refund of $1,029, and in Pennsylvania, where the median amount is $1,031.

Unclaimed refund amounts also break the $932 barrier in 15 other states and the District of Columbia. The table below shows the 18 jurisdictions where the unclaimed median 2020 tax year refunds are more than the national median amount.

Of course, it would be great to get the $1,000+ amounts that some residents of the Empire and Keystone States will, but even the smallest median refund amount — that's $761 in Idaho — is nothing to sneeze at.

You can see exactly where your state stands in the unclaimed refund sweepstakes at the ol' blog's special web page showing 2020's state-by-state unclaimed federal tax refund numbers.

No penalties for refund claims: Finally, if you're concerned about facing IRS wrath for not filing back in 2020, don't be.

There's no penalty for filing late when you're getting a refund of overpaid taxes.

Annual unclaimed refund issue: As I mentioned earlier, 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 below on nonfilers. They are amazingly consistent.

• 2023 in conjunction with unfiled 2019 returns;
• 2022 in conjunction with unfiled 2018 returns;
• 2021 in conjunction with unfiled 2017 returns;
• 2020 in conjunction with unfiled 2016 returns;
• 2019 in conjunction with unfiled 2015 returns;
• 2018 in connection with unfiled 2014 returns;
• 2017 in connection with unfiled 2013 returns;
• 2016 in connection with unfiled 2012 returns;
• 2015 in connection with unfiled 2011 returns;
• 2014 in connection with unfiled 2010 returns;
• 2013 in connection with unfiled 2009 returns;
• 2012 in connection with unfiled 2008 returns;
• 2011 in connection with unfiled 2007 returns;
• 2010 in connection with unfiled 2006 returns;
• 2009 in connection with unfiled 2005 returns;
• 2008 in connection with unfiled 2004 returns;
• 2007 in connection with unfiled 2003 returns; and
• 2006 in connection with unfiled 2002 returns.

You also might find these refund-related posts of interest:

• Key federal tax dates in 2024
• Do you have to file a tax return? Probably
• May 17, 2024, is deadline for nonfilers to claim 2020 COVID cash

Advertisements

🌟 Search Amazon Business and Money Books 🌟
The text link above is an affiliate ad. If you click through and then buy a product, I receive a commission.