$1.5 Billion in Unclaimed Tax Refunds Is Set to Expire. Don't Lose Out

Does the IRS owe you money? Here's one group that needs to act fast.

There are certain groups of people who aren't required to file tax returns every year. For example, single individuals with gross income below $12,550 don't have to file their 2021 tax return this year, and the same can be said for retirees who don't have any taxable retirement income.

However, even if you are in a group that doesn't have to file a tax return, it's typically to your benefit to do so. In simple terms, people in the lower income brackets tend to qualify for valuable tax credits that can result in a big tax refund. In fact, the IRS recently revealed that taxpayers are entitled to $1.5 billion in unclaimed tax refunds from the 2018 tax year -- and the deadline to claim them is approaching fast.

Wasn't the 2018 tax deadline three years ago?

You may be wondering why I'm suggesting that people file their 2018 tax returns now. After all, the IRS deadline to file a 2018 tax return came and went in April 2019, and even with extensions, 2018 returns were due in October of that year.

However, as mentioned in the introduction, certain groups aren't required to file a tax return if they don't want to. This primarily includes low-income individuals and others who have virtually no chance of owing the IRS money for the tax year. And while you technically have to file a tax return if you make more than the minimum income thresholds, the IRS isn't likely to come knocking on your door if you don't file and are owed a hefty refund.

In practice, think of the tax deadline as the day by which the IRS wants money owed to them -- but they're generally happy to hang on to your money for as long as you'll let them.

Under the current tax law, U.S. residents have a three-year window beyond the initial due date to file their tax return and claim a refund. So, the last day to file a 2018 tax return and claim a refund for that tax year is this year's tax deadline, which because of weekends and holidays, falls on Monday, April 18.

What kind of refund are we talking about?

The IRS says the average person entitled to an unclaimed refund in 2018 is entitled to about $800. And it's fair to say that many people have unclaimed refunds of much more than that amount.

Just to name a few possibilities:

• If you had income from a job in 2018 but it was less than the amount that required you to file a tax return, you might qualify for the Earned Income Tax Credit, or EITC, which could be worth up to $529 (no dependents) or $6,557 (with dependents).
• If you didn't file a return, but were a full-time college student in 2018, you could potentially qualify for the American Opportunity Credit or Lifetime Learning Credit if you paid tuition (even if you received student loans).
• The Child Tax Credit was worth $2,000 for the 2018 tax year per child, and up to $1,400 of the credit can be refunded even if you had no tax liability.

I could go on, but you get the point. The bottom line is that if you didn't file a tax return for 2018, it's in your best interest to do so -- even if you earned little or no income for that year. Gather your income information (you can request a tax transcript from the IRS if you don't have it) and fill out a 2018 tax return form, which can be found here. At this point, you'll have to mail in your 2018 return, but if you are entitled to a refund, you could end up with a rather large reward for little effort.