Today is tax day, the day when millions of individuals are finally getting their federal income tax returns filed so that they can claim their tax refunds. Although many late tax filers delay completing their returns until the last minute because they want to put off paying money they owe to the IRS, there are many others due to receive a refund who wait simply because they are too busy to get their tax return filed.
However, individual taxpayers are not the only ones about to receive a refund. The IRS is about to be able to keep over $750 million in unclaimed tax refunds technically due to individual taxpayers.
The refunds stem from the 2010 tax year. The IRS has been holding onto the $750 million plus in unclaimed refunds for the three years since April 15, 2011.
The refunds stem from just over 900,000 individuals who did not file tax returns for the 2010 tax year but from whom the IRS withheld tax. The IRS legally owes the money to those individuals. However, unless the individuals file tax returns to claim the refunds, the IRS has no obligation to pay the refunds.
While those individuals can still file a tax return for the 2010 tax year to claim their refunds, the timeframe when they can file is almost over. By law, an individual has three years from the tax filing date to claim a refund owed to them.
“It does happen every year,” noted James Robertson, a tax preparer with H&R Block. “There is that three-year filing window in which you have to file a return and claim a refund. And if you don’t claim a refund within that three years, it becomes property of the Treasury.”
That means when the calendar rolls over to April 16, 2014, those thousands of people will be out their refunds and the IRS keeps the money.
Refunds Due Primarily to Students, Retirees Who Work Part Time
Many of those due the refunds worked during the 2010 tax year and had federal income tax withheld from their paychecks. These individuals include students and retirees who did not work full time.
These individuals did not earn enough income to meet the minimum threshold at which they would be required to file a tax return. In many cases, these individuals may not realize they had income tax withheld from their paychecks and that they can obtain a refund of that tax withholding if they simply file a tax return.
For the 2009 tax year, the IRS was able to keep over $900 million in unclaimed tax refunds. Experts estimate that for the 2013 tax year, the amount of unclaimed refunds could be higher than $1 billion.
The average refund owed for the 2010 tax year is just over $825 per person. Although an individual must provide the necessary Form W-2s and other supporting documentation to submit the return, the actual fee for filing a basic tax return generally runs only a couple of hundred dollars. Therefore, the average person could walk away with over $600 if they are willing to go through the effort to submit their 2010 return before the deadline tonight.
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Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.