IRS Holds Over $1 Billion in Unclaimed 2021 Tax Refunds: Could You Be Owed Money?

The IRS generally doesn’t need to persuade individuals to claim their tax refund. Once the filing season begins, millions of taxpayers submit their returns promptly to secure their yearly financial boost.

By March 28, the IRS had processed over 88 million tax filings, offering an average refund amounting to $3,170, which marks a rise of 3.9 percent compared to the corresponding timeframe in the previous year.

However, many taxpayers remain unaware that they are owed money. According to the IRS for the 2021 tax year, approximately 1.1 million individuals across the country have unclaimed refunds amounting to more than $1 billion, with the average refund being around $781.

In Maryland, approximately 23,000 taxpayers are expected to receive a typical refund of $827, as reported by the IRS. Meanwhile, in New York, the agency estimates that around 73,000 individuals might be entitled to a median refund of $995, which stands out as one of the highest amounts.

The IRS is additionally urging individuals to verify if they qualify for the 2021 pandemic-related recovery rebate credit. This particular credit amounts to $1,400 and forms part of a series of economic impact payments; it should not be confused with any unpaid sum mentioned earlier.

However, one crucial factor in favor of not delaying your 2021 tax filings was the significant increase in available tax benefits that year, as stated by IRS spokesperson Eric Smith.

"It's your funds. You ought to reclaim them," Smith stated.

Maybe you always file, but check with your young adult children, friends and extended family members to ensure they aren’t missing out on a refund they could use right now.

As the filing deadline approaches, here’s what you need to know about uncollected refunds.

Ensure that the return is submitted by April 15.

Parents claiming a child born in 2021 as a dependent on their income taxes might qualify for a pandemic relief payment of up to $1,400.

Certain individuals might not be aware that they qualify for the payment. For instance, the IRS mentioned that those who included an additional dependent—like a parent, aunt/uncle, or grandchild—on their 2021 federal tax return could potentially be entitled to claim this credit.

By law, taxpayers usually have three years from the typical April filing deadline to claim a refund.

This means the three-year filing window closes this April 15.

If people missed the deadline, their money becomes the property of the U.S. Treasury.

This is how the IRS identifies individuals who are due a refund.

The IRS reviews the W-2 and 1099 documents as well as other third-party reports they get from employers, banks, and other entities to determine the approximate number of individuals potentially eligible for a tax refund along with the expected amounts.

These are the people who usually have an outstanding tax refund.

A significant number of low- and moderate-wage employees might qualify for the earned income tax credit (EITC). In 2021, this benefit could amount to up to $6,728 for those claiming qualifying children. This credit assists people and households whose earnings are beneath specified limits.

As a parent, if your child was employed during the summer or academic year of 2021, make sure they verify if they are eligible for a tax refund.

Students or individuals who work part-time might not have made sufficient income, hence they could be exempt from filing a tax return. Despite this, their employers might still have withheld federal taxes. Refunds typically occur because of excess withholding, indicating that you paid the government more funds than were necessary. You won’t face a failure-to-file penalty if you are eligible for a refund.

Don’t miss out on extended credits for 2021.

The American Rescue Plan raised the value of the child tax credit (CTC), extended eligibility to include 17-year-olds, and made it fully refundable for the majority of households.

The credit itself isn’t new. It was created in 1997 and has always been meant to help struggling families. Before 2021, though, the credit was worth up to $2,000 per eligible child. The law increased it for 2021 to as much as $3,000 per child for dependents ages 6 through 17, and $3,600 for dependents ages 5 and under — but just for 2021.

There was also more money funneled through the tax credit to help parents offset work-related child-care expenses, while the tax credit for child and dependent care was temporarily increased from a maximum of $1,050 for one child and $2,100 for two or more children to $4,000 and $8,000. The credit was fully refundable, which means you get a refund, even if it’s more than what you owe.

You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work, according to the IRS.

Here's what you should know when submitting a past due tax return.

You can get both current and previous year’s tax forms along with their instructions by visiting irs.gov and tapping on the link for “Find forms & instructions.”

Remember though, your 2021 tax refund might be withheld if you have not submitted your tax returns for both 2022 and 2023. Furthermore, any refund amount could potentially go towards settling outstanding debts owed to the IRS or a state agency. This includes using the funds to cover overdue child support payments or other federal liabilities. Even so, receiving the refund can aid in tackling these obligations. Therefore, make sure to file your taxes.

As the tax deadline approaches quickly, you might consider seeking out a tax specialist to assist with filing an overdue return.

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