Could the IRS owe you money? It is entirely possible, especially if you have not filed a tax return for a previous year. In fact, taxpayers are about to miss out on the chance to get some of the more than $1.1 billion dollars in unclaimed 2014 tax refunds. The IRS gives a three-year limit for taxpayers to claim a refund, so this year’s tax date, April 17, 2018, also serves as the deadline to receive a 2014 tax refund.
A Million People
The IRS estimates that approximately one million U.S. taxpayers have not filed a 2014 tax return. Based on their calculations, more than $1.1 billion is due in refunds with the midpoint amount of tax refunds estimated at $847. This means that about half of those owed a refund will have more than that and half will have less.
Not all taxpayers with an outstanding return will get a refund; some will owe money. However, you might think that you owe money but actually are owed a refund. If you continue to wait, then you miss out on the chance to get your refund, so it is always beneficial to go ahead and file your outstanding returns.
Not Required to File
The IRS believes that a number of those owed a refund are non-filers, or those who do not have to file a tax return. Examples include those making under a certain amount, such as single-filers making less than $10,400 or heads of household earning less than $13,400.
Often, students and part-time workers fall into this category. They might not worry about filing because they do not have to, but their employers still take out tax withholdings on their earnings. For many of these candidates, they are owed a refund if they file, especially if they also are eligible for the Earned Income Tax Credit. So, if you earned money in 2014 and never filed a return, it might be worth your while to do it, even if you are not obliged to do so.
Substitute for Return
Although a portion of those who are owed a refund did not need to file, some will think they owe money or are afraid they do, because they were supposed to file a return and did not. Perhaps they even have received a tax bill stating they owe money.
This situation might include a Substitute for Return or SFR, which is what the IRS files when you do not submit a return. When the IRS files your taxes for you, they use the data they have on hand. This includes information your employers sent in, such as W2s and 1099s. Based on this income, they file a return for you, giving you the standard deductions. However, you do not benefit from the deductions and tax credits owed to you, which could leave you with a tax bill.
However, when you file your tax return in place of the SFR, you can include any deductions and credits for which you are eligible and still have the paperwork. This can save you money, and in some instances, it might even turn your tax bill into a refund!
Those who file a return for a previous year who have a refund do not have to worry about penalty fees and interest. You receive the full amount of your refund, as long as you meet the deadline. If you miss the deadline, you still are not penalized for your late filing, but you no longer have access to the refund funds.
Up to Date
In order to get your past refunds, you must be in compliant for all tax years. Therefore, if you have not filed a tax return for 2014 and expect a refund but have outstanding returns for 2015 and 2016, you might find your refund held until you file. You may also have your refund garnished if you have any outstanding tax debt for another year, unpaid child support, past due student loans, or state tax debt.
What to Do
The IRS is trying to contact the millions of taxpayers who might be eligible for the outstanding tax returns, but do not wait around for a letter from them. If you never filed your 2014 returns (or 2015 or 2016), then take action now to file them before you miss out on the refund. So, what do you do? Complete the following steps:
- Find the right tax return form — make sure you use the form for the year at hand, such as 2014
- Review the instructions and the tax deductions and credits for that year; the tax code changes from year to year, so you want to ensure you use the right options
- Compile your receipts, W2s, 1099s and other forms; you might have to connect with your employers, financial institutions, or the IRS to find these forms
- Fill out the tax return on your own or with the aid of a tax professional
- Submit your return to the IRS and await your refund or pay your bill, if applicable
You should also not wait to take care of any other outstanding tax returns, even if you might not be eligible for a return. Now is the best time to get yourself out of tax debt and once again compliant so you no longer have to worry about it. There are programs in place to negotiate your tax debt if you cannot afford it, such as the Offer in Compromise, Installment Agreement, and Penalty Abatement.
Contact Fidelity Tax Relief and talk to one of our knowledgeable tax professionals about your circumstances. They will assess your situation and determine the right course of action for you.