$1 Billion in Unclaimed Tax Refunds About to Expire, Act Now to Claim Yours

The Internal Revenue Service (IRS) has notified that over $1 billion in tax refunds from the 2020 tax year is yet to be claimed. The May 17 deadline to file a claim is quickly approaching and the IRS is urging nearly 1 million people who are yet to file their tax year 2020 returns. “We want taxpayers to claim these refunds, but time is running out for people who may have overlooked or forgotten about these refunds,” IRS Commissioner Danny Werfel said in March. 

How Much is Owed?

The IRS says that about 940,000 people across the U.S. are yet to submit their 2020 tax returns​ and the estimated median refund owed to them is around $932. The government agency also released data in the official release, showing how much the residents of different states are owed. The list is topped by Alabama with a total of $16,839,800 in unclaimed returns. The median potential refund for the state stood at $926 for the 15,200 people who are yet to claim the returns. 

Alabama was closely followed by Alaska, with a total of $4,335,300 in unclaimed refunds. Arizona bagged the third spot with $26,939,600, followed by Arkansas with $9,392,600, and California with $94,226,300 in unclaimed 2020 tax returns. 

Who Are Eligible For the 2020 Tax Return?

According to the IRS, several low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). The EITC was worth about $6,660 for taxpayers with qualifying children in 2020.  Furthermore, individuals who did not receive one or more Economic Impact Payments or stimulus payments, are also eligible for the COVID-era Recovery Rebate Credit for 2020. 

Here’s How to File the Potential 2020 Tax Returns

Individuals who think they may be owed a refund, need to file their 2020 tax return. They will need the necessary documents from the 2020 tax year including Form W-2, which is issued by the employer, Form 1099 for self-employed and freelance workers, and Form 5498, to report individual retirement accounts. Apart from those, individuals may also need tax year 2020 Forms 1040 and 1040-SR. 

Taxpayers can request copies of these documents from their employer, or bank. They can also use the IRS’s “Get Transcript Online” tool to get a free wage and income transcript, containing all the required documents. The IRS offers tools and resources on IRS.gov. for filing returns, like the Interactive Tax Assistant (ITA).

Deadline to File for the 2020 Tax Returns

While there is no penalty for failure to file a refund, a return must be filed within three years of its due date. For 2020 tax returns, taxpayers were given a little more time than usual to file their claim for refunds. The 2020 filing deadline was pushed to May 17, due to COVID-19. The IRS had previously issued Notice 2023-21 that provides guidance on claims needed to be filed before the postponed deadline.

Taxpayers who fail to file a claim may have their refund withheld if they don’t file their 2021 and 2022 tax returns. As per the IRS, taxpayers can also use the refund to make payments towards the money they owe to the IRS or a state tax agency, or toward any unpaid child support or other debts owed to the federal government that are past due.