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IRS Has USD1bn In Unclaimed Refunds

by Leroy Baker, Tax-News.com, New York

27 February 2012


The United States Internal Revenue Service (IRS) has announced that refunds totalling more than USD1bn may be waiting for one million people who did not file a federal income tax return for 2008.

The IRS estimates that half of these potential 2008 refunds are for USD637 or more. However, to collect the money, a return for 2008 must be filed with the IRS no later than April 17 this year.

It was indicated that some people may not have filed because they had too little income to require filing a tax return, even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes the property of the US Treasury.

For 2008 returns, the window therefore closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

Nevertheless, the IRS has reminded taxpayers seeking a 2008 refund that their refunds may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people could also stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC).

The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were USD38,646 (USD41,646 if married filing jointly) for those with two or more qualifying children, USD33,995 (USD36,995 if married filing jointly) for people with one qualifying child, and USD12,880 (USD15,880 if married filing jointly) for those with no qualifying children.

TAGS: individuals | tax | tax credits | Internal Revenue Service (IRS) | tax authority | United States | individual income tax

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