Well, let’s start with some good news on the economic front. After the latest earnings reports, it looks like the GDP is doing better than analysts thought thanks to consumer spending and an aggressive investment attitude by businesses this year. Recession fears aren’t totally dispelled, but the future economically speaking does look a bit brighter.
One thing that isn’t landing well right now is gas pricing. Looks like it’s going up. Be prepared to increase your budgeted gas allowance for a little while and re-think any big road trips you have planned still this summer.
Wouldn’t it be nice to have a little cash infusion for that very purpose?
You might find it in the IRS’s possession. Let me explain what I mean.
Some Los Angeles friends of mine had this big 5-gallon jug in their house that they’d dump their change into regularly. No matter what, if they had coins, they’d go clink, clink, clink from their pockets into the jug.
Then, once it was full, they’d cash it in and splurge on vacation. It almost felt like free money.
That’s kind of what tax refunds are like. Though, obviously, a refund isn’t actually free money (and really, neither was the jug of coins). When you get a refund, it’s like getting a little wind in your financial sails that you can use for anything — splurging on something is a pretty common choice (though maybe not the best one depending on your situation… something I’ve discussed before).
So what if my friends had just thrown that jug out after they filled it to the brim?
“What a waste!” you’d probably think to yourself (or something a bit harsher). Well, not claiming tax refunds is kind of the same thing. It’s money left on the table. And there are SO many people just throwing away the “free” money the IRS wants to float their way (2019’s unclaimed amount was 1.5 billion!).
So, let’s talk a little about how you or your Beverly Hills friends can determine if you have any refunds you’ve been leaving in the IRS’s hands.
Could Tax Refunds Be Waiting for You, Los Angeles Taxpayers?
“Always overpay your taxes. That way you’ll get a refund.” – Meyer Lansky
Hard to believe, but every year the IRS is left with a pile of money on its hands. And the agency actually wants to give it away: tax refunds uncollected from previous years.
From tax year 2019 alone, the pot was 1.5 billion in refunds from more than a million taxpayers. Bet you could use some of that. Maybe you’ve got it coming, too. (If you didn’t file your 2019 taxes, you missed your chance to claim any refunds as that deadline was July 17.)
How can you see if you’ve got a forgotten refund coming? And how long do you have to claim it?
You’ve got three years
Generally, federal tax refunds have to be claimed within three years or they’re forfeited to your favorite tax entity in Washington. The deadline just passed on that 2019 money (federal Tax Day was specially extended into the summer back in 2020) but normally you have until Tax Day in the third year after your return was due to file a return and potentially claim your refund.
For your 2020 federal tax return (which you had to file in April of 2021), you have until April 15, 2024, to file a return and/or claim a past refund; for your 2021 return you have until Tax Day in 2025, for your 2022 return you have until Tax Day in 2026, and so on.
People leave this money on Uncle Sam’s table for many reasons. People get busy, and many folks who forget about refunds are young adults, college students, seniors, and low-income taxpayers.
Other reasons a refund can’t get back to its rightful taxpaying owner include:
- Mistakes in bank information or mailing addresses;
- Forgotten withholdings on even the smallest paychecks;
- Neglecting to claim deserved refundable tax credits (these can put a refund back in your pocket even if you owe no income tax).
Some people are just plain scared of IRS penalties for filing late — even if they don’t have reason to be.
Past refunds can evaporate for more serious reasons, too… like if the taxpayer owed past-due federal tax, child support, alimony, state tax, or some other kind of governmental debt. A return can also be held up because of identity theft and filing fraud, too, though the IRS probably would’ve notified you about this before now.
(And we all can’t be reminded enough: The Internal Revenue Service does not get ahold of taxpayers – especially about refunds – using texts, email, or the phone. They use letters. Tell us immediately about anybody who uses any means other than the mailbox to reach you claiming to be the IRS.)
Where can you look?
The IRS has a website with a plain-speaking name: “Where’s My Refund?” There you can check on refunds for the 2020 through 2022 tax years. You’ll need your Social Security number or Individual Taxpayer Identification Number.
You’ll also need your tax-filing status (Single, Married Filing Jointly, Head of Household …) and the amount of refund you expected. This is a great place to start, by the way, if your refund just plain never showed up.
(“Where’s My Refund?” is also on the IRS2Go mobile app.)
Logging on here is usually better than calling or writing the IRS, one government agency still scrambling to get better at infamously bad response times. If you must call, it’s (800) 829-1040 (isn’t that clever?). Right now, they say your wait time averages 13 minutes, longer on Mondays and Tuesdays. Sometimes we tax pros can get through faster.
You have other options, too:
Check your IRS online account to get your federal tax history. If you’re setting up a new account, have a photo ID handy.
The Taxpayer Advocate Service is an independent organization in the IRS fighting for you. TAS offers help finding and claiming past refunds. Click the TAS website or call (877) 777-4778.
By the way, a lot of private-company “services” out there will also claim to be able to help you nail down a past refund – usually for a fee or a cut. As you can see, you don’t need them. Save your money now that you’ve found it again.
For most of us, tax refunds aren’t something we miss out on because we’re usually paying close attention to our tax standing with the IRS. But just in case you haven’t been (or have someone in your life that may not be aware of what’s coming to them), this is how you do it.
Also, tax refunds aren’t the only thing I want you to be thinking about in terms of your IRS standing. There are tax strategies for reducing what you owe that are particularly valuable as well. They may not get you a refund, but they will help you take advantage of tax credits that are available to you in your situation.
If we haven’t had a tax planning strategy talk before, let’s sit down soon:
In your corner,
Pronto Income Tax Team