Time is running out for the estimated 1.5 million people who did not file a 2018 federal income tax return. After April 18, these unclaimed refunds—totaling almost $1.5 billion—will become property of the U.S. Treasury Department.

"The IRS wants to help people who are due refunds, but haven't filed their 2018 tax returns yet," said IRS Commissioner Chuck Rettig. "But people need to act quickly. By law, there's only a three-year window to claim these refunds, which closes with this year's April tax deadline.”

Listen to audio highlights of the story below:

IRS data show that half of these refunds are worth more than $813. For some taxpayers, this is the largest cash windfall they receive all year.

“There is this unfortunate misunderstanding that if somebody does not make enough money to pay taxes, they do not need to file a tax form,” said Joseph Leitmann-Santa Cruz, CEO and executive director of Capital Area Asset Builders, a non-profit based in Washington, D.C. “From the IRS' perspective, that is correct. However, Uncle Sam may owe that family thousands of dollars.”

Taxpayers who fail to file a federal return may also miss out on claiming two important tax credits: The Earned Income Tax Credit, which was worth as much as $6,431 in tax year 2018, and the Child Tax Credit worth up to $2,100 in 2018.

“This is something that primarily impacts low- to moderate-income families, and especially low-income Black and Brown families throughout the United States,” Leitmann-Santa Cruz told Checkbook. “It is a significant amount of money that is being wasted on an annual basis, and it's primarily because of the lack of awareness and the lack of education that we all need to proactively participate in the tax system. The tax system is not only for the wealthy.”

Leitmann-Santa Cruz wants people to remember that these refunds and credits are not a handout, rather something Uncle Sam is temporarily holding until you claim it.

“This is not free money being given out. This is money that each taxpayer is fully entitled to,” he said.

Note: The IRS reminds taxpayers that it may hold onto those refund checks if you have not filed tax returns for 2019 and 2020. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

File 2021 Tax Return to Claim Expanded Child Tax Credit

The federal government expanded the Child Tax Credit for tax year 2021. The change in the tax code provided by the American Rescue Plan Act was designed to lift a significant number of American families out of poverty.

Families with dependents under the age of 18 can receive a credit of up to $3,600 per each child under the age of six, and up to $3,000 for each child between the ages of six and 17.

You may have heard about advance payments of the Child Tax Credit that occurred for the tax year 2021 as part of the American Rescue Plan Act. To have been eligible for advance payments, you (and your spouse, if married filing jointly) must have:

  • Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return or
  • Entered your information in 2020 to get stimulus (Economic Impact) payments with the “Non-Filers: Enter Payment Info Here” tool or
  • Given the IRS your information in 2021 with the “Non-Filer: Submit Your Information” tool

You can still claim that credit, if eligible, by filing a 2021 return. The IRS explains how to do that on its website.

The Child Tax Credit is fully refundable, meaning you can claim the credit even if you don't have earned income or don't owe any income taxes.

Where to Get Help?

For those not sure how to deal with the confusing process of filing a return and claiming credits, visit the IRS website. You can file your 2018, 2019, 2020, and 2021 tax form (most likely for free) using the IRS Free File. You can also file state tax returns for free this way and claim back state refunds and credits.

Other options for low- to moderate-income families:

More Info: IRS has $1.5 billion in refunds for people who have not filed a 2018 federal income tax return; April deadline approaches

 

 

Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He is also the consumer reporter for NW Newsradio in Seattle. You can also find him on Facebook, Twitter, and at ConsumerMan.com.