The IRS recently announced that it may be holding more than $1 billion in refunds that could be waiting for about a million taxpayers who didn't file a 2013 federal income tax return. If you didn't file a return for 2013, even if you didn't have to, you may want to do it now. There's a good chance you're missing out on free money if you don't.
A billion dollars in unclaimed 2013 tax refunds
To be precise, the IRS estimates that 1,042,100 taxpayers are entitled to 2013 tax refunds that they haven't claimed yet, and that the total amount that could be refunded is $1,054,581,000. This implies the average taxpayer who is due a refund would get just over $1,000. And the IRS says the median expected refund would be $763, meaning that half of people would be entitled to less than this amount, while half would be entitled to more.
Image source: Getty Images.
What's more is that this amount does not include any unclaimed tax credits such as the Earned Income Tax Credit (EITC) or either of the education credits. So, it's fair to say that a lot of people are missing out on some pretty big paydays.
Why are these refunds sitting unclaimed?
There are a few reasons people may not have filed a return to claim their 2013 tax refund.
For starters, not everyone is required to file a tax return, and the IRS doesn't just issue refunds automatically. Generally speaking, if your income was less that the standard deduction and personal exemption amount for the tax year in question -- a total of $10,000 for the 2013 tax year -- you weren't required to file a return.
Additionally, while people who earned more than the minimum threshold in 2013 technically were required to file a tax return, it's important to mention that the IRS's "failure to file" penalties only apply if the taxpayer is owed money. On the other hand, if a refund is owed, the IRS will gladly hang on to it. If the IRS knows they'll need to pay you thousands of dollars when you file your return, they aren't exactly going to send agents to knock on your door to move the process along.
Just because you don't need to file a tax return doesn't mean you shouldn't
Many people who didn't file simply don't know that they're owed a refund. For instance, someone who earned less than $10,000 from a part-time job in 2013, but had federal income tax withheld from their paycheck, is generally entitled to that money back.
Students are another group that could be entitled to big refunds. If a college student paid tuition, he or she may be entitled to a massive tax credit, in addition to a refund of any withholdings from a job they had.
The Earned Income Tax Credit, or EITC, is another big potential payday for lower-income taxpayers, especially those with dependents. For the 2013 tax year, the EITC was worth as much as $6,044, and many of these large credits remain unpaid.
The point is that while you may not have had to file a tax return in 2013 (and other years for that matter), not doing so could mean you're literally turning down money -- sometimes lots of it -- for something that probably won't take up too much of your time.
You can still claim your money, but act fast
According to the current tax law, you have a three-year window to claim a tax refund, starting with the original tax deadline. For 2013 refunds, the clock started with the April 15, 2014 tax deadline, and expires with the tax deadline in 2017, which thanks to a weekend and a holiday, is pushed back to April 18. So, if you think you might be entitled to a 2013 tax refund, you have until April 18, 2017 to claim it. After that date, it becomes the property of the U.S. Treasury.
If you didn't file a tax return in 2013, it's probably a smart idea to do it now to see if you're entitled to a refund. You can get 2013 tax forms from the IRS website, and many popular tax software programs like TurboTax will still allow you to complete a prior year's tax return. And if you can't find your W-2s or other income documentation, you can use the information from your tax transcript (which you can obtain online here) to complete your return.
As I said, it shouldn't take too long, and could put hundreds or even thousands of dollars back in your pocket.
