American taxpayers could be entitled to about $1.1 billion in unclaimed tax refunds from the 2014 tax year, according to a recent IRS newsletter. The agency estimates that 1 million taxpayers could have a claim to some of this money, with a median unclaimed refund amount of nearly $850.
However, the deadline to claim this money is rapidly approaching. If you didn't file a 2014 tax return because you didn't owe the IRS money or weren't required to file a return, you need to read this.
Why is there so much unclaimed money?
Simply put, many Americans with little or no income don't file tax returns because they (correctly) think they have no federal income tax liability and aren't required to file a tax return.
Technically, Americans are required to file a tax return if their income exceeds their standard deduction and personal exemption allowances for a given year. For 2014, the standard deduction was $6,200 for single filers, $9,100 for heads of household, and $12,400 for married couples filing jointly. The personal exemption amount was $3,950 per person.
For example, if you were single with no children in 2014 and under 65, you were technically required to file a tax return if your income for the year exceeded $10,150. The thresholds are slightly higher for individuals over age 65.
I say "technically" because even though everyone with income in excess of the standard deduction and exemption amounts are required to file, there's no IRS penalty for not filing unless you owe money. If you're entitled to a refund, you're free to not file -- although that's not a good idea, for obvious reasons.
However, even if you're not required to file, that doesn't mean you shouldn't. In fact, many lower-income individuals, and even some with no income at all, are entitled to some valuable tax credits, which we'll get into later in the article.
Why is this so important now?
Why am I making such a big deal about 2014 tax returns now? Because time is running out to claim any money you're entitled to, that's why.
Specifically, taxpayers have three years to claim a refund, starting with the original due date for that year's tax return.
So, since 2014's tax return was due in April 2015, this year's tax deadline will represent the three-year mark. Any 2014 tax refunds not claimed by the April 17, 2018, Tax Day officially become the property of the U.S. Treasury.
Who should take a closer look?
As I alluded to earlier, many lower-income taxpayers may qualify for some pretty lucrative tax credits. The Earned Income Tax Credit (EITC) is perhaps the biggest example, worth as much as $6,143 for the 2014 tax year. Even taxpayers without children could qualify for some amount of EITC if their income for the year was less than $14,590 for singles ($20,020 for married couples). Here are the full EITC thresholds for 2014:
$46,997 ($52,427 if married filing jointly) for those with three or more qualifying children
$43,756 ($49,186 if married filing jointly) for people with two qualifying children
$38,511 ($43,941 if married filing jointly) for those with one qualifying child
$14,590 ($20,020 if married filing jointly) for people without qualifying children
So if your income was under these thresholds in 2014, and you didn't file a tax return, it's certainly in your best interest to do so.
Others who should consider filing are those who were college students in 2014 and earned little or no money. If you paid tuition (even if you used a student loan) in 2014, you could be entitled to the American Opportunity Credit or Lifetime Learning Credit.
It's worth looking into
If you didn't file a 2014 tax return for whatever reason, it's certainly worth taking a look to see if you might be entitled to a refund. The IRS stated that the median potential unclaimed refund from 2014 is $847, so this isn't an insignificant amount of money.
If you're missing any necessary tax forms, such as a W-2, 1099, or other form, you should request copies from your employer or other entity. Alternatively, you can order a wage and income transcript online at IRS.gov, and it won't cost you a dime.
Finally, it's also worth pointing out that if it turns out that you're entitled to a 2014 tax refund, the IRS may hold your check if you also haven't filed for the 2015 and 2016 tax years, or if you have any past-due federal debts.
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