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Close to 1M people need to claim refunds before May 17

- Julie Jason COMMENTARY

There are about a billion reasons for close to a million people to pay special attention to this tax column, even though Tax Day, April 15, has come and gone.

For starters, the IRS would like to pay back more than $1 billion in refunds that almost a million people are due, but refunds are not automatic. You need to act.

The billion dollars is the amount that remains unclaimed because approximat­ely 940,000 people have yet to file their tax returns for tax year 2020, according to the IRS (tinyurl.com/mpfpmw2).

Under the law, taxpayers have three years to file and claim their tax refunds. If they miss the deadline, their refund “becomes the property of the U.S. Treasury.”

May 17, 2024, is the deadline to file for 2020 tax-year refunds. Why is it not the traditiona­l April 15? Because in 2021, the tax-filing deadline for 2020 tax-year returns was moved to May 17 because of COVID.

(Note: If you requested a filing extension in 2021 for your 2020 tax-year return but subsequent­ly never filed the return for that year, you have until Oct. 15, 2024, to file a refund claim, according to an IRS spokespers­on.)

The estimated average midpoint for unclaimed individual refund amounts for tax year 2020 is $932, according to the IRS, which means half the refunds are above that amount and half are below.

Texas (93,400) and California (88,200) are the states with the estimated greatest number of individual­s who are owed a tax refund, with the two states combining for an estimated total exceeding $200 million. In my home state of Connecticu­t, there are only 9,800 estimated individual­s who are owed a tax refund, worth a total of more than $11 million.

Why might you be due a refund? Did you have a job in 2020? Did your employer withhold taxes for you? You may not have filed a tax return for 2020 because you did not need to pay additional taxes.

Or, you may be eligible for the Recovery Rebate Credit (tinyurl.com/p3p4sjbv), a refundable credit for individual­s who did not receive one or more Economic Impact Payments, also known as stimulus payments, distribute­d in 2020 and 2021, according to the IRS. Those who are eligible for a Recovery Rebate Credit must file a tax return first by May 17 to claim it, even if they had minimal or nonexisten­t income. For those who want to claim a 2021 Recovery Rebate Credit, they must file a tax return by April 15, 2025.

To be eligible for the credit, you must be a U.S. citizen or U.S. resident alien for the year in question, not be a dependent of another taxpayer and have a Social Security number issued before the tax return’s due date (tinyurl.com/4twm26xb).

Even if you didn’t owe the IRS any income taxes for 2020 and are owed a refund, you need to file your 2020 tax return in order for the IRS to send you a check. For more informatio­n on who should file, see the IRS webpage “Don’t Lose Your Refund by Not Filing” at tinyurl.com/34kpe5cm.

A cautionary note from the IRS: The refund may be held up if an individual has not filed a tax return for 2021 and 2022. Also, the refund will be applied to amounts owed to the IRS or a state tax agency, and it may be used to offset unpaid child support or other past-due federal debts, including student loans.

And while some have the option of filing in an effort to receive funds, the IRS is also reaching out to others who failed to file a tax return and owe money. More on that in an upcoming column.

Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, “The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Associatio­n. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.

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