Most hardworking Americans aren't in the habit of saying no to free money. It's surprising, therefore, to learn that roughly 1 million taxpayers are set to forgo refunds from the 2013 tax year. According to a March 1 statement, the Internal Revenue Service is sitting on as much as $1 billion in total refunds for unfiled 2013 returns. If you're among the million Americans who stand to collect, now's the time to get that old return in -- before it's too late.
The window is closing
Generally speaking, you're supposed to file a tax return each year in time for the deadline, which, for 2017, is April 18. (Yes, you get a few extra days this year.) That said, you technically have a three-year window to claim a refund, which means that if you've yet to file your 2013 return, you still have over a month to do so. Once that April 18 deadline passes, however, you'll no longer have an opportunity to get at that money, at which point it will go straight to the U.S. Treasury instead.
All in, the IRS says it could owe up to $1 billion in total refunds for the 2013 tax year. Though the median estimated refund varies by state, it ranges from $619 in Idaho to $917 in Alaska. (Note that these figures apply to federal, not state, refunds.)
Now if you're worried that filing your 2013 tax return three years late will result in a penalty that wipes out any potential refund and then some, fear not. There's no penalty for filing a return after the deadline if the IRS owes you money. Rather, it's the opposite situation you need to worry about.
If you owe the IRS money and are late filing your return, you could face a penalty equal to 5% of the taxes you owe for every month your return is late, up to a maximum of 25%. And if you owe money and file your return more than 60 days after the deadline, you'll face a minimum penalty of $135 or 100% of your unpaid tax bill, whichever is smaller. But again, if you're the one who's owed money, you won't be penalized for getting your return in late.
Now keep in mind that if you've also yet to file your 2014 and 2015 returns, your 2013 tax refund may be withheld by the IRS until you get those forms in. Additionally, if you're due a refund from 2013 but owe the IRS money from another tax year, that 2013 refund will first be applied to whatever balance you have outstanding. The same holds true if you're delinquent on a federal student loan or child support payment -- you won't get that money in hand, but instead, it will be used to offset your obligations. But if it's just that 2013 return you neglected to file and you are due a refund, you should have no problems collecting your money in full.
Know what you stand to lose
Failing to file a tax return at any time could mean losing out on a pretty sizable refund, and this especially holds true if you're a lower earner. Each year, an estimated 20% of eligible filers miss out on the Earned Income Tax Credit (EITC), which this year could be worth up to $6,318 depending on your earnings and the number of qualifying children in your household.
Back in 2013, the EITC was worth as much as $6,044, and the income thresholds to qualify were as follows:
Single, head of household, or widowed | $14,340 | $37,870 | $43,038 | $46,227 |
Married filing jointly | $19,680 | $43,210 | $48,378 | $51,567 |
DATA SOURCE: IRS.
Note that these limits have since increased, which means that if you currently earn slightly more than what you're seeing above, you may still qualify for the 2016 tax year.
Better late than never
If you're among the many Americans who failed to submit a 2013 return (or a 2014 or 2015 return, for that matter), you should know that it isn't too late to file those forms and get your hands on some much-needed cash. It's a far better alternative than donating that money to the U.S. Treasury and permanently kissing it goodbye.
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FAQs
The IRS says taxpayers have left nearly $1 billion worth of unclaimed refunds that can still be claimed before it's too late. In California, over 88,000 taxpayers could be eligible to receive some cash back, with an average missing refund total of $932.
Why did I get back less money from taxes than they said? ›
If you owe the IRS for past-due taxes, the agency might be applying your refund to your outstanding tax debt. Likewise, your tax refund can be reduced if you owe past-due child support payments or debts to certain other federal agencies.
Why isn t getting a large tax refund the best money habit? ›
The simple reason you don't want a tax refund is that getting one means that you've just loaned the U.S. government your money—without making any interest. It's not the smartest financial plan, especially if you're lugging around credit card debt, student loans or any other kind of debt.
What percentage of taxpayers get refunds? ›
Average federal tax refund, ranked by state
| Rank | State | Percentage of taxpayers receiving a refund |
|---|
| 10 | California | 70% |
| 11 | Illinois | 78% |
| 12 | New Jersey | 74% |
| 13 | Louisiana | 81% |
46 more rowsMar 10, 2023
The IRS can delay your tax refund until it completes any audits. This is most common when the IRS is conducting a mail audit on your EITC or ACTC return from a prior year. Normally, you'll receive IRS Letter CP88 indicating that your refund is frozen until the IRS completes the audit.
Why did the IRS take all my money? ›
An IRS levy permits the legal seizure of your property to satisfy a tax debt. It can garnish wages, take money in your bank or other financial account, seize and sell your vehicle(s), real estate and other personal property.
Will tax refunds be bigger in 2024? ›
So far in 2024, the average federal income tax refund is $2,850, an increase of 3.5% from 2023. It's not entirely unexpected: To adjust for inflation, the IRS raised both the standard deduction and tax brackets by about 7%.
Will tax refunds be smaller in 2024? ›
Bigger tax refunds in 2024
Through the end of February, tax refunds are about 4% higher than last year – although they are still below the recent high of $3,473 in 2022, when pandemic benefits bolstered the typical refund check. All data reflects average tax refunds through the end of February for each year.
What is the average tax return for a single person making $60,000? ›
If you make $60,000 a year living in the region of California, USA, you will be taxed $13,653. That means that your net pay will be $46,347 per year, or $3,862 per month.
Who has the highest tax refund? ›
States with the biggest tax refund
According to Lending Tree, Wyoming had the highest average tax refund for several years in a row. This information was based on an analysis of individual income tax returns from the 2020 tax year—that's the latest tax year currently reported by the IRS's SOI information.
“The best strategy is breaking even, owing the IRS an amount you can easily pay, or getting a small refund,” Clare J. Fazackerley, CPA, CFP, told Finance Buzz. “You don't want to owe more than $1,000 because you'll have an underpayment penalty of 5% interest, which is more than you can make investing the money.
Why is a big tax return bad? ›
Is getting a big tax refund a good thing? No, some financial experts and taxpayers say, because it means you're giving up too much of your paycheck to taxes during the year. If less is taken out for taxes, you'll get a smaller refund but more money in each paycheck for expenses or saving and investing, they argue.
How many people owe the IRS? ›
Most people file and pay their taxes by April 15. But more Americans than ever owe past-due taxes. As of the end of 2022, 18.6 million individual taxpayers owed the Internal Revenue Service $316 billion in overdue taxes, according to the agency. That number is up from 16.8 million owing $308 billion in September 2019.
What is the average tax return for a single person making $20,000? ›
If you make $20,000 a year living in the region of California, USA, you will be taxed $2,687. That means that your net pay will be $17,313 per year, or $1,443 per month.
Why are refunds taking so long in 2024? ›
The IRS says that tax returns can be delayed for the following reasons: It was sent by mail. It contains errors or is incomplete. It needs further review.
How long does the IRS hold unclaimed money? ›
The IRS is required to keep the filing open and hold on to unclaimed income tax refunds for three years. If you don't file for the tax refund after three years, the money becomes property of the US Treasury, and you won't be able to get it back.
What does refundable credits mean on tax transcript? ›
A refundable tax credit is a credit you can get as a refund even if you don't owe any tax. Tax credits are amounts you subtract from your bottom-line tax due when you file your tax return. Most tax credits can reduce your tax only until it reaches $0.
Do you have to pay back a refundable tax credit? ›
An individual who qualifies for a refundable tax credit will receive a payment from the government in excess of the taxes they would otherwise owe. Instead of paying taxes, they are eligible to be net recipients.
How much money goes unclaimed by IRS? ›
They're eligible to receive the taxes withheld from their paychecks, but that money won't come to them automatically — they have to file a return to recover it. Every year, IRS officials say, about $1 billion to $1.5 billion in refunds goes unclaimed, compared with about $300 billion in refunds paid.
