How to Know if the IRS Owes You Money
Getting a tax refund can be a pleasant surprise. Maybe you need money for an emergency, you want to pay off some debt or save, or you just want to buy something you can't afford.
But many tax refunds go unclaimed each year for various reasons. Many Americans leave money on the table every year. This is often because they are due for a refund but did not request a refund.
Find out why your tax returns go unclaimed and how to know if you haven't claimed them in the past as the IRS might be owing you.
How Millions of Tax Refunds Go Unclaimed
Millions of income tax refunds usually go unclaimed. Often taxpayers don't realize they'll be getting a refund, so they don't file a tax return. You may not have filed a tax return due to your income level. You are not required to file a return unless you earn more than a certain amount during the fiscal year.
Whether you need to file a federal tax return in 2022 depends on your income in 2021. Income requirements vary by age and registration status. If your gross income equals the amounts determined by the Internal Revenue Service (IRS) for your age and filing status, you must file a tax return.
Single: $12,550
Single and over 65 years of age: $14,250
Head of household: $18,800
Head of household and over 65 years of age: $20,500
Married filing jointly: 25,100 USD
Married filing jointly and one of the spouses is 65 years of age or older: $26,450
Married filing jointly and both spouses are 65 years of age or older: $27,800
Qualified Widow(er): $25,100
Qualified widow(er) over 65: $26,450
But just because you don't have to file a tax return doesn't mean you should ignore it. Even if your income is less than these amounts, you can get a refund. In most cases, taxpayers who do not have to file a return will receive a refund if they do.
In 2019, the IRS reported that approximately $1.4 billion in tax refunds were still pending for the 2015 tax year alone. These refunds belonged to people who had not yet filed returns for that fiscal year.
Who owns these unclaimed tax refunds?
There are many reasons why these tax refunds go unclaimed. However, there are a few patterns among those due to unclaimed returns. The most common non-IRS refunds include:
Individuals who do not file a final return on behalf of a deceased family member for reimbursement
Individuals who qualify for the earned income credit but do not file a return because their income is below the threshold
Low-income self-employed who pay their estimated taxes but do not file a tax return because their income is below the threshold
Students
Workers who work part-time or only part of the year but who have a withholding tax on income
Claiming your Earned Income Tax Credit
A deduction is useful to reduce taxes owed. But a tax credit is even better. A tax credit is deducted directly from the tax balance you owe. It does so dollar-for-dollar, while a deduction simply reduces the total amount of taxable income.
If you live in a low-income household, the Earned Income Credit can help you pay back some of the taxes you've already paid or even if you don't owe any taxes. Whether or not you qualify for this credit depends on your filing status, family income, and several dependent children.
The maximum tax credit for filing in 2021 is $6,728. This amount is refundable, which means the IRS will send the money if you have no taxes or owe less than this limit.
If you are eligible, you risk shortchanging your refund if you do not file a return to claim it.
Suppose you are claiming the Earned Income Tax Credit and your filing status is married filing separately. In that case, you must be eligible under the ARPA (American Rescue Plan Act) Special Rule of 2021.
How to claim your unclaimed Tax Refund
You may want to know if the IRS owes you money if you belong to one of the taxpayer groups above. First, check your records to make sure you've filed a tax return for each of the last three years you've earned.
Review your statements for the last three years to ensure they are accurate. Take the time to determine if you qualified for the EIC but didn't claim it.
If you haven't filed a return in the past three years, you can still request a refund. The law gives you three years after the filing deadline (usually April 15) to file your tax return and claim a refund. If you do not file within this time, you will lose the opportunity to claim your money.
Applying for a refund can be as simple as filing a return for the past three years if you missed a refund or qualified for the earned income credit but didn't claim.
Expense reimbursement checks are sent to the last known address unless you request direct deposit to your bank account. These can be returned to the IRS if you move and do not provide the new address to the IRS or the US Postal Service.
Summary
Even if your income is low enough that you do not have to file a tax return, the IRS may owe you a tax refund.
Low-income taxpayers who qualify for the income tax credit usually receive a refund.
You have three years from the tax filing deadline to file a tax return for that year and claim a refund.
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