IRS has $1.5 billion in unclaimed refunds. But April 18 is last day to claim the money.

IRS backlog could delay your tax return

The IRS said it has unclaimed tax refunds of almost $1.5 billion — and the tax agency is urging people to act before April 18 to claim any money that's due to them. 

The unclaimed refunds stem from about 1.5 million taxpayers who didn't file a tax return in 2018, the agency said. Because there's a three-year period to claim the refunds, the window for getting the money will close for most taxpayers on April 18, which is this year's tax deadline for federal taxes. People in Maine and Massachusetts have until April 19, 2022, to claim the refunds, due to the two states' Patriots' Day holidays.

The median value of the unclaimed tax refunds is $813 — which means half of the unclaimed refunds will be below $813, and half will be higher than that, the IRS said. 

While the majority of Americans file annual tax returns, there are some people who aren't required to do so. These are typically low-income households — for instance, those who earn less than the standard deduction generally don't have to file a return. For the 2021 tax year, the standard deduction is $12,550 for single filers and $25,100 for married couples. 

There are an estimated 12 million Americans who don't file annual tax returns, according to an estimate from the Center on Budget and Policy Priorities. The IRS has sought to reach out to those non-filers in the past two years since many of the federal government's stimulus efforts — from stimulus checks to the advanced Child Tax Credit payments — were based on a taxpayer's annual return. 

If the money isn't claimed by April 18, the refunds will become the property of the U.S. Treasury Department.

How to claim a refund

First, the refunds are tied to people who didn't file a return in 2018 — which means that taxpayers who already filed for the 2018 tax year aren't eligible for the unclaimed refunds. 

The first thing to know about claiming a refund is that you'll have to file a tax return for 2018.

"We want to help people get these refunds, but they need to file a 2018 tax return before this critical deadline," IRS commissioner Chuck Rettig said in a statement. 

You'll have to file a paper return with the IRS center that's listed on the final page of the current Form 1040. This is organized by state, so, for instance, taxpayers in Alabama, Georgia and several other Southern states should send their returns to an IRS office in Kansas City, Missouri. 

Only tax forms for 2019 and later can be e-filed, the IRS said in its statement.

That paper requirement could pose a downside, given that the IRS has warned that filing on paper can lead to delays in processing. Because these returns must be opened by hand, it's more time consuming for the agency to dispatch paper returns. This year, the IRS is urging taxpayers to file their 2021 returns electronically to ensure swift processing. 

Refunds may be held

Lastly, the IRS is cautioning that people who have unclaimed refunds from 2018 may have their checks held if they haven't yet filed tax returns for 2019 and 2020. 

On top of that, the refund will be applied to any amount that the taxpayer still owes to a state tax agency or the IRS — and it could also be used to offset overdue child support payments or past due federal debts, including student loans. 

Low- and moderate-income families may be eligible for bigger refunds if they file and qualify for the Earned Income Tax Credit, the IRS said. That credit in 2018 was worth as much as $6,431, the agency noted. This tax credit, also known as the EITC, is based on the number of children a family has, as well as their filing status. 

For instance, a married couple who file jointly with three or more children can qualifyfor the EITC if they earn less than about $54,800. However, that income threshold drops to about $49,100 for single taxpayers with three or more children.

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