Each year, the majority of people who file tax returns end up with some sort of refund. And for many folks, it's not a small number. Last year, the average refund equaled $2,782, which, incidentally, is nearly three times more than what most Americans have in the bank.
If you think that sounds like a lot of money, check this out: The IRS just announced that it's sitting on $1.1 billion in unclaimed tax refunds dating back to 2014. If you didn't file a tax return that year, now's the time to get moving -- especially if you want a piece of that pie.
Tax filing requirements
Filing a tax return isn't always mandatory. If your income falls below a certain threshold, you're technically not required to submit a return -- but that doesn't mean you shouldn't. That's because if you had too much tax withheld during the year, you could wind up getting a refund by filing a tax return. This especially is likely if your circumstances render you eligible for a refundable tax credit.
Most tax credits aren't refundable, which means the most they can do is lower your tax liability to $0. But some credits, like the Earned Income Tax Credit, pay you money if they trigger a mathematical refund on your taxes.
Let's say you file your return and realize you owe the IRS $200. If you then apply a non-refundable tax credit in the amount of $1,000, the most that credit will do is knock out that $200 debt. But if you apply a refundable tax credit in that amount, you'll get back $800 from the IRS.
What happens if you were due a refund on your 2014 taxes but are clearly very late in filing them? In that case, nothing -- but you'll get your money if you file that return in time for this year's deadline. The IRS won't penalize you for filing late if it owes you money. But if you owe the IRS money, it's a whole other story. In that case, you could face a host of penalties for filing your return late and being late on that payment.
Don't give up that money
Though the IRS has a collective $1.1 billion in unclaimed 2014 refunds, the estimated individual median refund is around $850. That's because roughly 1 million people didn't file tax returns for that year. Still, $850 is a nice chunk of cash to pass up, especially if you're low on savings or carrying costly credit card debt.
Think about the last time an unplanned bill fell in your lap. Would $850 have made a difference? Chances are, it would have.
If you want to get what's rightfully yours, dig up that old paperwork and get moving on your 2014 return. You have until April 17, 2018 to file your 2014 taxes, but if you don't submit your return in time, the U.S. government gets to keep your money, and you get nothing. Talk about a truly raw deal.
The Motley Fool has a disclosure policy.