The IRS announced last week that unclaimed federal income tax refunds for 2014 totaled $1.1 billion. What that means is that there are hundreds of thousands of taxpayers who did not file their 2014 tax return and are owed over a billion dollars by the federal government. Therefore, unless these people file their 2014 tax return they will be losing out on over a billion dollars. According to the IRS, the average potential refund is nearly $900. Therefore, for those taxpayers who did not file their 2014 tax return, if you don’t do something soon you will lose that refund.
In order to claim a refund for 2014, your tax return must be filed by April 17, 2018. Therefore, if you are one of the estimated 34,100 people in Michigan who did not file your 2014 tax return, you don’t have much time. The April 17, 2018 deadline is rapidly approaching and there are no extensions. Under federal law, taxpayers are allowed a three-year window for claiming a tax refund. If you don’t file a tax return, that refund becomes property of the U.S. Treasury. One thing I can assure you is the money looks better in your pocket than it does the U.S. Treasury’s.
It is also important to remember that particularly for low and moderate income taxpayers that if they don’t file their 2014 tax return, they are potentially losing more than just their tax refunds. Many of those individuals may be eligible for the earned income tax credit which, once again, they would lose if they don’t file their return. The earned income tax credit was established to help individuals and families whose income was below a certain threshold. The credit can be worth as much as $6,000. Therefore, for those people that would be eligible for the earned income tax credit, if you don’t file your 2014 tax return, you will lose that credit as well.
Many people who did not file their 2014 tax return are under the mistaken belief that the penalties they will owe will offset any tax refund; that is not the case. The IRS does not assess penalties for filing a late tax return if you’re entitled to a refund. Penalties are only assessed if money is owed. Therefore, if you haven’t file your 2014 tax return and you are entitled to a refund there is no downside in filing the return.
One caveat that you should be aware of and that is if you do file your 2014 tax return, it is possible that your refund check can be held by the IRS. The IRS can hold your refund check if you did not file your 2015 and 2016 tax return, or if you owe money to the IRS. Furthermore, the IRS is allowed to withhold money to offset unpaid child support or past due federal debts such as student loans. However, even if that is the case where they withhold some of your refund, you are still in a better position by filing your 2014 return than not.
There is only about a month before it will become too late to file your 2014 tax return. Therefore, if you haven’t done so, and particularly if you’re entitled to a refund, you want to make sure you get that return done as soon as possible. After all, I can assure the estimated one million taxpayers who did not file in 2014 that the over $1 billion refund can be better put to use yourself, than by the federal government.
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