The law gives taxpayers who fail to file their income taxes three years to submit a return and claim a refund. Generally, the three-year countdown starts on the due date of the return, including extensions.
The federal tax filing deadline for individuals has been extended to May 17, 2021. Quarterly estimated tax payments are still due on April 15, 2021. For additional questions and the latest information on the tax deadline change, visit our “IRS Announced Federal Tax Filing and Payment Deadline Extension” blog post.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
Over a million Americans fail to file a tax return every year. By not filing, many of these people risk losing any refund they're owed, which averages more than $600, according to Internal Revenue Service estimates.
The law gives procrastinators three years to submit a return and claim a refund. The three-year countdown starts on the original due date of the return or the extension due date, if an extension was filed. Late filers who owe no taxes don't pay any penalty, and might even be eligible to get credits beyond the money withheld from their wages.
Forgotten tax withholdings
The IRS sets minimum gross income levels below which taxpayers do not have to file a return. For example, in 2021, taxpayers under age 65 who are single and made less than $12,400, or heads of household who earned less than $18,650, have no obligation to file their 2020 taxes unless special circumstances exist.
These non-filers may have overlooked the fact that their employer withheld income tax throughout the year, which is money the IRS owes them. Additionally, their low income may qualify them for tax credits only available by filing a tax return. Non-filers also forgo the chance to receive the Earned Income Tax Credit, or EITC, by not filing.
So, just because you may not be required to file a tax return, doesn’t mean you shouldn’t. You could be missing the opportunity to get a tax refund.
Time matters with tax refunds
May 17, 2021 is the last day to file your original 2017 tax return to claim a refund. If you received an extension for the 2017 return then your deadline is October 15, 2021.
If you miss the deadline, any excess in the amount of tax you paid every paycheck or sent as quarterly estimated payments in 2017 goes to the U.S. Treasury instead of to you. You also lose the opportunity to apply any refund dollars to another tax year in which you owe income tax.
Under certain conditions the IRS will withhold your refund check. It can be used to pay:
- past-due student loans,
- child support and
- federal tax debt you owe.
The IRS can also hold refund checks when the two subsequent annual returns are missing. That means you should file returns for 2018 and 2019 as soon as possible. For the 2018 tax year, with a filing deadline in April of 2019, the three-year grace period ends April 15, 2022.
Don't forget your credits
Tax payers who don't use a professional or online tax preparation service may not know what tax credits are available to them unless they read or follow tax-related news. Unclaimed 2017 tax credits represent part of the unclaimed $1 billion in the IRS's coffers. Those with low or moderate incomes may be eligible for the Earned Income Tax Credit even if they didn't have a tax bill.
If your 2017 income fell below these limits, you might be able to claim EITC by filing by May 17, 2021:
- $15,051 ($20,600 if married filing jointly) and no qualifying children
- $39,617 ($45,207 if married filing jointly) and one qualifying child
- $45,007 ($50,597 if married filing jointly) and two qualifying children
- $48,340 ($53,930 if married filing jointly) and three or more qualifying children
Those needing to claim refunds for the 2017 tax year have other possible tax credits in addition to EITC they may be able to claim including:
- Additional Child Tax Credit
- American Opportunity Credit
- Adoption Credit
- Refundable Credit For Prior Year Minimum Tax
- Health Coverage Tax Credit (Form 1040 required)
- Credit for Federal Tax on Fuels (Form 1040 required)
Obstacles to your tax refund
One of the hills you have to climb to claim your refund is gathering the necessary documents. If you kept your financial records, you have an easy ascent. If not, then you must build time into your filing schedule to obtain a copy of your W-2 from your employer and any 1099 forms you're missing from your bank and other payers.