Deadline Approaches to Claim Over $1 Billion in Unclaimed IRS Refunds

As the deadline approaches for claiming unfiled tax refunds from the year 2020, the Internal Revenue Service has issued a stark reminder: approximately $1 billion in refunds remains unclaimed, affecting nearly 1 million individuals across the United States. The deadline to file a claim is May 17, 2024, and for those who have not yet submitted their tax returns, this may be their last opportunity to recover funds that could significantly impact their financial well-being.

The median refund for those eligible is estimated at $932, a sum that could provide much-needed relief for many households. States such as Texas, California, Florida, and New York have the highest numbers of individuals who have yet to file, with Texas alone accounting for about 93,400 potential claims. The urgency of the situation is underscored by the fact that if these refunds are not claimed by the deadline, they will revert to the U.S. Treasury, effectively becoming lost funds for the taxpayers who earned them.

Historically, the three-year window for filing tax returns has allowed individuals to claim refunds without penalty, provided they do so within the stipulated time frame. However, the COVID-19 pandemic extended this deadline, pushing it to mid-May 2024 for the 2020 tax year. This extension was designed to accommodate the disruptions caused by the pandemic, which left many individuals unable to file their taxes on time. For those who may not typically file tax returns, this situation presents a unique opportunity. Many of the unclaimed refunds are available to individuals who were eligible for COVID-era stimulus payments but did not receive them. By filing a 2020 tax return, these individuals can also claim the Recovery Rebate Credit, which compensates for missed stimulus payments. The IRS has emphasized that there is no penalty for failing to file if a refund is due, making this a risk-free opportunity for many.

The IRS has provided a detailed breakdown of the estimated number of individuals eligible for refunds in each state, highlighting the potential financial impact on local economies. For instance, in Ohio, approximately 31,400 individuals are owed an average refund of $909, totaling nearly $32.9 million. Similarly, New Jersey residents could collectively claim over $27 million, with a median refund of $920.

Taxpayers are encouraged to gather necessary documentation, such as W-2 and 1099 forms, to facilitate the filing process. The IRS offers resources to assist individuals in obtaining these documents, including a free wage and income statement through its online services. As the deadline looms, the IRS is urging individuals to act swiftly. The agency has noted that any refund amount for 2020 may be withheld if the individual has not filed returns for subsequent years or if they owe debts such as unpaid child support or federal loans. This adds another layer of complexity for those considering filing, as they must navigate potential offsets against their refunds.

In summary, the impending deadline for claiming unfiled tax refunds from 2020 presents a critical moment for nearly 1 million individuals who may be unaware of their eligibility. With the potential for significant financial relief on the table, the IRS's call to action serves as a reminder of the importance of tax compliance and the opportunities that exist for those who may not typically engage with the tax system. As the clock ticks down to May 17, the message is clear: for many, this is a last chance to reclaim what is rightfully theirs.