IRS Is Holding Almost $1 Billion in 2012 Tax Refunds

Naturally, you make sure that your clients file timely tax returns, when required, and receive any refunds that they’re entitled to. But what about their relatives – perhaps children fresh out of school or elderly grandparents – and others who haven’t used your services before? They could be in line for a big, fat refund and not even know it.

Think that it’s unusual? Think again. According to a news release by the IRS, an estimated one million taxpayers may be owed an astounding total of $950 in income tax refunds from the 2012 tax year. To collect the money, all these wayward taxpayers have to do is file a return for 2012 by this year’s tax return deadline (IR-2016-38, 3/10/16)

“A surprising number of people across the country overlook claiming tax refunds each year. But the clock is ticking for taxpayers who didn’t file a 2012 federal income tax return, leaving nearly $1 billion in refunds unclaimed,” said IRS Commissioner John Koskinen. “We especially encourage students and others who didn’t earn much money to look into this situation because they may still be entitled to a refund. Don’t forget, there’s no penalty for filing a late return if you’re due a refund.”

The IRS estimates the midpoint for potential refunds for 2012 is $718.

In cases where a tax return was not filed, the tax law provides most taxpayers with a three-year window of opportunity for claiming a refund. However, if no return is fled in time, the money becomes the property of Uncle Sam. For 2012 tax returns, the window closes on April 18, 2016 (April 19 for taxpayers residing in Maine or Massachusetts).

The IRS is also reminding taxpayers seeking a 2012 refund that their checks may be held if they have not filed tax returns for 2013 and 2014. The refund will be applied to any amounts still owed to the IRS, or their state tax agency, and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just a refund of taxes withheld or paid during 2012. Many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). For 2012, the EITC is worth as much as $5,891. It helps individuals and families whose incomes are below certain thresholds. The IRS points out that the EITC thresholds for 2012 were:

$45,060 ($50,270 if married filing jointly) for those with three or more qualifying children,

$41,952 ($47,162 if married filing jointly) for people with two qualifying children,

$36,920 ($42,130 if married filing jointly) for those with one qualifying child, and

$13,980 ($19,190 if married filing jointly) for people without qualifying children.

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2012, 2013 or 2014 should request copies from their employer, bank or other payer. If you’re unable to obtain the missing forms, you can go to www.irs.gov and use the “Get a Transcript by Mail” button to have a paper copy of their transcript sent to your address. Taxpayers can also file Form 4506-T to request a transcript of a tax return. The information on the transcript can be used to file the return.

Make sure that your clients know about this refund opportunity so they can inform extended members of their family. And if someone else walks in your door before April 18, you may be able to secure a refund for them dating back three years. There’s close to $1 billion sitting out there for the asking.