Unclaimed tax refunds: Does Uncle Sam owe you?

Young black woman, hands on cheeks and smiling, as she checks her laptop to discover if she has an unclaimed tax refund waiting for her. Image:

In a Nutshell

For many taxpayers, a refund is the best part of tax season. Yet every year, plenty of people miss out on a refund because they don’t file a federal income tax return. Here’s how to find out if Uncle Sam owes you an unclaimed tax refund.

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This article was fact-checked by our editors and reviewed by Christina Taylor, MBA, senior manager of tax operations for Credit Karma Tax®. It has been updated for the 2018 tax year.

Though millions of taxpayers get a small windfall every tax season, some people unwittingly leave money on the table in the form of unclaimed tax refunds. In fact, the IRS says it saw more than $1.4 billion in unclaimed tax refunds in 2015 alone, and April 15, 2019 is the last chance for most taxpayers to claim a refund from 2015.

If you have an active unclaimed refund waiting for you, the clock has started — you have a limited time to claim it.

Here’s how unclaimed refunds occur, how to find out if you have one and what you need to do if Uncle Sam owes you.


What is an unclaimed tax refund?

An unclaimed refund is exactly what it sounds like — a refund of federal income taxes that someone hasn’t claimed. Unclaimed refunds can happen for multiple reasons.

For example, if your gross income is less than the threshold for your age and filing status, you may not be required to file a federal income tax return. But if your employer withheld income taxes from your paycheck anyway, you might be due a refund of that money.

Or maybe you earned too little to have taxes withheld but still qualify for the earned income tax credit, a federal income tax credit designed for lower-income taxpayers. The credit is refundable, which means claiming it could get you a refund even if you don’t owe any taxes or the credit is more than what you owe — but the only way to get the credit is to file a federal tax return.

FAST FACTS

The refundable Earned Income Tax Credit

The Earned Income Tax Credit is a tax credit for working people with low to moderate income. To be eligible for the credit, you must meet all these requirements:

  • Valid Social Security numbers for filers and dependents
  • At least $1 of income earned from working for someone else or owning or running a farm or business
  • Earned income and adjusted gross income together must not exceed certain limits
  • Filing status not married filing separately
  • U.S. citizen or resident alien all year
  • Not a qualifying child of another person
  • No foreign earned income
  • Must meet income limits
  • Any investment income totals $3,450 or less
  • Must have a qualifying child, or be between 25 and 64 at year’s end, live in the U.S. for more than half the year, and not qualify as a dependent for another person

To claim the EITC, you must file a federal income tax return, even if you owe no tax or aren’t required to file. One out of every five people who are eligible for the EITC doesn’t claim it.

The amount of the credit you can get for 2017 varies from $510 to $6,318, depending on the number of qualifying children you claim.

Other ways taxpayers miss out

Unclaimed refunds aren’t the only way you might miss out on getting money the IRS may owe you.

There are also undeliverable refunds, which happen when the IRS mails a refund check to an incorrect address. This often happens because you haven’t updated your address with the IRS, which mails checks to the last-known address they have on file for taxpayers.

If this happens, the postal service will return the check to the IRS and the burden will be on you to follow up with the agency about your refund. Fortunately, you can check this online by using the IRS tool “Where’s My Refund?” or by downloading the IRS2Go app to check your refund status.

It’s up to you

If the IRS owes you money in the form of a tax refund, it’s ultimately up to you to claim it.

“The IRS is not responsible for hunting you down if they owe you money,” says Mark Fried, financial planner and president of TFG Wealth Management in Bucks County, Pennsylvania.

Fried cautions that people should be aware of potential scams involving unclaimed refunds. He says the IRS website is your best bet for finding out whether you’re actually owed any money.

“There are other sites, but be careful because they may use your information to try and sell you something or charge you a fee to help you get your money from the IRS,” he says. “If they ask for too much personal information or require you to sign a document turning over the refund to them, I would be very suspicious. The AARP and Better Business Bureau are good places to check out sites.”

 

The clock is ticking on unclaimed refunds

The IRS issues alerts about unclaimed tax refunds to urge taxpayers who didn’t file a tax return or who never claimed their refund to do so. That’s because the clock is ticking, and you have a limited amount of time in which to claim your unclaimed refund.

If you haven’t filed a tax return, the IRS generally gives you three years from the original filing due date to file a return and claim any refund you’re owed. Typically, the deadline date is Tax Day of the due year. If you don’t file a return before that window closes, your money becomes Uncle Sam’s — permanently.

In March 2019, the agency estimated 1.2 million people who didn’t file their 2015 tax return were approaching the end of the three-year window in which to claim their refund. Those refunds totaled more than $1.4 billion, the agency said, with half the refunds at more than $879.

How to find out if you have an unclaimed refund

There’s really only one way to find out if you have an unclaimed refund waiting for you — file a tax return for the year in question.

If you didn’t file a return for the 2015 tax year, you should do it by this year’s tax filing deadline, which is April 15, 2019. As long as your 2015 tax return is postmarked by that date and sent to the correct address, you’ll be within the three-year window and should be eligible to claim any refund you may be due.

To file tax returns from previous years, go to the Forms and Publications page on IRS.gov to access the forms and instructions you need, such as a 1040 or 1040EZ. If you don’t have your income forms, such as a W-2 or 1099, from the year you need, contact your current or former employer to get this information. Or you can request your information from the IRS — which is likely on file, as most companies are required to report it — via a copy of your wage and income transcripts.

Don’t hesitate to file a return for a tax year you may have missed, even if it’s been three years. While the IRS will penalize filing late if you owe money, there’s no penalty for filing a late return if you’re due a refund.


Bottom line

Not filing a return could potentially cost you hundreds, if not thousands, of dollars. So consider filing a federal income tax return even if you don’t owe — Uncle Sam may end up owing you!

Think about filing even if you don’t have the means to pay a tax professional, as the IRS provides resources that can help through its Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs, Fried says. Both programs offer free tax preparation for those who qualify. Use the VITA/TCE locator tool on the IRS website to find a location near you.

And of course, you can use free online tax-preparation services like Credit Karma Tax® to find out if you’re due a refund for 2018, even if you didn’t pay or owe any federal income taxes for last year. When you use it to file your federal income taxes, Credit Karma Tax® can help you determine if you’re eligible to claim the EITC — just one of the refundable credits that could add up to an unclaimed refund.

Remember, you have three years from its original due date to file a return to claim any refund you may be due. That sounds like plenty of time, but if Uncle Sam owes you money, why wait?


Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.