The Internal Revenue Service (IRS) announced on Tuesday that it is holding $2 billion in unclaimed refunds owed to 1.7 million individual taxpayers who didn’t file a federal tax return in 2002. This money will become the property of the U.S. Treasury unless these taxpayers file by April 17.
“We want people to get the refunds they are entitled to,” said IRS Commissioner Mark Everson. “We urge taxpayers to double-check their records before the April 17th deadline. Taxpayers can’t get a refund if they don’t file a tax return.”
Taxpayers have a three-year window for claiming a refund, but refund checks for 2002 will be held up if the taxpayer has not filed tax returns for 2003 and 2004. No penalty is due on a late filing if a taxpayer is due a refund, but the refund will be applied to taxes owed, unpaid child support or federal debt like student loans.
Many individuals who did not file and are due refunds had taxes withheld or made payments out of self-employment earnings, the IRS says, but were not required to file because their income was too low. In some cases these people would have been eligible to claim the Earned Income Tax Credit (EITC) in 2002 and are losing out on both the refund of tax payments and the tax credit.
Luis D. Garcia, a spokesman for the IRS in Detroit said that some people don’t realize that they are owed money or that they are eligible for the EITC, the Detroit Free Press reports. The income limits for the EITC in 2002 were $33,178 with more than one qualifying child, $19,201 with one qualifying child, and $11,060 with no qualifying child.
Most people who don’t file are nervous about penalties if they owe money, the Free Press says. “Even if they are getting a refund, they get nervous,” said Marshall Hunt, director of the tax assistance program for the Accounting Aid Society in Detroit. Hunt says the tax assistance sites in Detroit will help low-income taxpayers file their 2002 returns as well as the current return. “My advice is always to file timely – even if you owe, the penalties are less, if you file on time,” Hunt told the Free Press.
The IRS estimates that half of the taxpayers who can claim 2002 refunds would receive more that $570. California has the largest number of individuals who can claim a refund, followed by Texas and Florida.