Did you know that $1.1 billion unclaimed tax refunds are about to expire soon? The IRS just recently announced that these refunds are expiring on this year’s tax deadline, which is April 18, 2011. The law requires that the return be properly addressed, mailed and postmarked by that date.
If you are one of those people who have not filed your 2007 tax return yet and you expect to receive a refund, you have better start working on it because when the deadline passes, your rights for the refund will be forfeited!
The IRS estimates that half of this refund are $640 or more!Â California leads the way with an estimated of 124,000 individuals with a median refund of $597 followed by Texas at 91,000 individuals, Florida at 71,500 individuals, New York at 62,600 individuals and Illinois at Â 38,800 individuals to round up the top five states.
The federal government will be happy to keep it as they need the money as well as much as we do. But if this is the case, wouldn’t it be better if the IRS just not announced it and keep the money anyways?
Why would someone wait this long to file their return?
Most people that I know filed their tax returns the same week they received their W-2s especially if they know they are getting a huge refund. Usually, these are the ones who don’t itemize (1040EZ and 1040A filers). So the question is “why would someone wait this long to file their return?”
While some may have just waited, most people probably did not know that they are getting a refund in the first place. On one of my previous post, some taxpayers areÂ not required to file because they did not make enough money and they probably won’t owe taxes even if they file. So to make it simple, the IRS are allowing these people not to file to save everybody the extra administrative paperwork. Because of this, these taxpayers may have gotten this “not filing” advice and decided not to do so. However, if they have a decent income and have dependents,Â Â they should file their tax return even if they are not required to. This is because there are a lot of credits that they can avail even if they do not owe any taxes. Examples of this credits are the earned income credit, additional child tax credit, making work pay credit. For example, with the earned income credit alone, they can lose as much as $5,000 if they meet the income limit and have at least three qualifying dependents.
Lastly, even if they don’t qualify for the credit, they should still file if taxes are withheld on their paycheck and they do not owe taxes.
Is There A Penalty If You File This Late?
If you do not owe any taxes, you will not be assessed a late filing penalty as penalties only applies to the tax liability amount. However, you don’t get to receive interest on the refunds for three years either just because you left your money with the IRS. So in essence, you have loaned your money for three years for 0% interest rate!
What If I Forgot To Claim Additional Deductions or Credits?
Other people who may also meet the April 18 deadline are the ones who have filed their return in 2007 but later found out that they forgot to include certain deductions and credits. If this is your case, you can Â file an amended return and claim additional refund.
Can I File Electronically for This Prior Year Returns?
Electronic Â filing are only available to current year returns. For prior year and amended returns, you must complete a paper copy and mail it in to the IRS. The return must be postmarked on April 18, 2011 and must be mailed to the correct address for you to receive the refund.
In addition, receiving these prior year refunds takes longer than usual. It may take at least eight weeks before you receive it.
Good advice Ken! There are a number of credits if you are married and filing jointly – more so if you have kids. Would be unfortunate to not claim these!