Don't Mess With Taxes

Photo by Karolina Grabowska

The Internal Revenue Service is about to turn out the lights on the 2020 tax refund party. The chance to get your part of more than $1 billion in unclaimed tax money ends on Friday, May 17.

The eligible refund recipients are an estimated 938,800 folks nationwide who didn’t, for a variety of reasons, file a 2020 tax return during the 2021 filing season. Tax law says nonfilers have three years to file and collect their refund money.

So why didn’t their deadline come and go on this past April 15? You might recall that three years ago, we were dealing with the COVID-19 pandemic, and Tax Day was pushed to May 17, 2021.

Now that three-year filing and refund claim deadline is almost here. So affected taxpayers have until this week to collect their part of the unissued refunds, which come to a median average amount of $932.

If those don’t claim that money by May 17, the U.S. Treasury gets to keep it. Forever.

My post from March when the IRS first announced this latest batch of unclaimed refunds has more on the collection process. Here are the highlights.

Don’t worry about penalties: First, if you’re worried you’ll get in trouble for filing late, don’t be.

Uncle Sam only gets upset if you owe him and don’t send the IRS a Form 1040 along with the amount due. There is no penalty for failing to file a tax return if you’re due a refund.

Overlooked credits: Second, you might be missing out on more than you think.

The IRS’ estimate of the amount of refund money doesn’t take into account credits that non-filers may be eligible to receive in connection with their 2020 tax return.

This includes the Earned Income Tax Credit (EITC), a tax break created for workers who don’t make much money. Back in 2020, the EITC was worth as much as $6,660 for taxpayers with qualifying children.

Then there’s the Recovery Rebate Credit (RRC). This coronavirus-prompted tax break was created for individuals who did not receive one or more Economic Impact Payments, also known as stimulus payments, that were distributed in 2020 and 2021.

Both the EITC and RRC are refundable tax credits. A tax credit provides a dollar-for-dollar offset of any tax owed. When a credit is refundable, if you qualify for more credit than tax due, you get the excess credit back as a refund.

But the EITC, RRC, and possibly other 2020 credit or deductions can be claimed only through May 17.

Gather your old tax material: Third, you need to get the 2020 tax statements and IRS forms.

If you don’t have your old W-2 or other forms for the 2020 tax year, contact that employer or issuer of the other forms. If that’s not possible, order a free wage and income transcript at IRS.gov using the Get Transcript Online tool.

Official IRS tax year 2020 Forms 1040 and 1040-SR and instructions also are available to download on IRS.gov at its Forms, instructions, and publications page.

Don't forget state taxes: Finally, most U.S. taxpayers live in states that also collect income taxes. So, it’s possible these federal return nonfilers also might have unclaimed state refund money.

Check with your state tax department about any potential unclaimed tax refund at that level. If it’s available, those officials should be able to tell you what you need to do to get it.

And speaking of states, you can see exactly where your state stands in the unclaimed federal tax refund count at the ol’ blog's special web page showing 2020's state-by-state unclaimed federal tax refund numbers. It shows how many unclaimed refunds in each jurisdiction, as well as the median amount per state.

The key to all these actions is to take them soon. Like today! And definitely file that old tax year 2020 federal Form 1040 by Friday, May 17.

You also might find these items of interest:

• 6 tax credits for lower-to-middle income taxpayers 
• 8 reasons to file a federal tax return, even if the IRS doesn't require it 
• May 17, 2024, is deadline for nonfilers to claim 2020 COVID tax credit cash 
• May 17, 2024, is the deadline to file for your part of $1 billion in unclaimed tax year 2020 refunds

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