Uncle Sam is sitting on $1.5 billion in tax refunds from 2016, and taxpayers have two days to grab their cash or lose it.
July 15 isn’t just the due date for 2019’s federal income tax returns and taxes owed, it’s also the last day the IRS will accept late returns for the 2016 tax year.
Filers generally have three years to claim a federal tax refund. Once the window closes, you’ve missed the opportunity and the U.S. Treasury retains the money.
Some 1.4 million people are due federal refunds from 2016. These checks are a decent chunk of change: The IRS estimates the median 2016 tax refund to be $861.
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Sometimes life gets in the way of people who would otherwise file on time. Anything from an illness to a natural disaster could result in filers missing tax returns.
“Most of the time, if they didn’t file that 2016 return, they had something going on in their life,” said Kathy Morgan, enrolled agent at Puzzled by Taxes in Haughton, Louisiana.
For instance, back in 2016, catastrophic flooding in Louisiana wiped out plenty of paperwork for some of Morgan’s clients, resulting in delays, she said.
“I have tons of people who were trying to reconstruct their business records from 2016 to get their returns filed,” she said. “They had eight feet of water in their business and in their home.”
Better late than never
Late filers who owe the IRS generally face steep penalties. Failing to pay your taxes by the appropriate due date leads to a penalty of 0.5% of the tax owed for each month or part of a month the tax is unpaid.
Fail to file on time and you’re on the hook for a penalty of 5% of the unpaid tax for each month or part of a month that you’re late.
But if you fail to file and the taxman owes you, then you simply miss out on any money you’re entitled to.
Refunds aren’t the only opportunity you’ll lose in that case. Tax credits for that year also go out the window.
Consider that the earned income tax credit was worth up to $6,269 back in 2016, according to the IRS.
Got an old return?
Jetta Productions Inc
Submitting an earlier year’s tax returns are a headache because they require filers and their tax professionals to dig through volumes of old receipts and statements.
“Sometimes it’s people who have some kind of Schedule C business, and you’re trying to recreate the records on expenses, where they received their 1099s from, and you’re pulling bank statements,” said Ann Kummer, CPA and partner at Kirshon & Co. in Poughkeepsie, New York.
“The older they are, the harder they are to do,” she said.
Filers who are just getting to 2016’s returns have an extra obstacle this year: the taxman’s massive mail backlog amid the coronavirus pandemic.
E-file can only accept the current year’s returns and those going back two years, meaning you can submit 2019’s taxes electronically, as well as those for 2018 and 2017.
That means 2016 returns must be filed on paper.
And don’t think you just wait in line at the post office and hope for a postmark prior to July 15.
“We recommend that clients mail it certified and get certified online tracking,” Morgan said. “This way, you get the receipt acknowledgement and save it.”
It could be months before you get your money back from the IRS, and you want to make sure you have a paper trail proving the agency received your return on time.