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Financial Planning > Tax Planning > IRS Updates

$1 Billion in Unclaimed Tax Refunds Will Expire May 17

By John Manganaro

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Some 940,000 U.S. taxpayers have unclaimed refunds for tax year 2020, according to the IRS, and they have until May 17 to submit their tax returns.

Under the law, taxpayers generally have three years to file and claim their tax refunds. If they don’t file within three years, the money becomes the property of the U.S. Treasury.

The average median refund is $932 for 2020, according to the IRS, with a collective unclaimed value above $1 billion. The number of eligible filers and the average refund amount varies considerably by state, as shown in this IRS graphic.

In an announcement about the forthcoming deadline, IRS Commissioner Danny Werfel said the IRS wants taxpayers to claim these refunds, but time is running out for people who may have overlooked or forgotten them.

Typically, the normal filing deadline to claim old refunds falls around the April tax deadline, which is April 15 this year for 2023 tax returns. But the three-year window for 2020 unfiled returns was postponed to May 17, 2024, due to the COVID-19 pandemic emergency. The IRS issued Notice 2023-21 on Feb. 27, 2023, providing legal guidance on claims required by the postponed deadline.

As noted in the IRS announcement, the $932 average rebate estimate does not include the Recovery Rebate Credit or other credits that may be applicable, and the IRS has previously reminded those who may be entitled to the COVID-era Recovery Rebate Credit in 2020 that time is running out to file a tax return and claim their money.

“People faced extremely unusual situations during the pandemic, which may have led some people to forget about a potential refund on their 2020 tax returns,” Werfel said. “People may have just overlooked these, including students, part-time workers and others. Some people may not realize they may be owed a refund. We encourage people to review their files and start gathering records now, so they don’t run the risk of missing the May deadline.”

The IRS warned taxpayers seeking a 2020 tax refund that their funds may be held if they have not filed tax returns for 2021 and 2022. In addition, any refund amount for 2020 will be applied to amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or other past due federal debts, such as student loans.

Credit: Bloomberg

John Manganaro

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