How to Determine If You Owe Money to the IRS

It can be pleasant to receive a tax refund. Perhaps you require the cash to cover an unexpected expense, want to reduce your debt, want to save money, or want to treat yourself to something you otherwise couldn't afford. Every year, a sizable portion of tax refunds go unclaimed for various reasons. Each year, a lot of Americans throw money away. This frequently occurs because they should have filed a return to claim a refund but didn't. Learn more about the causes of unclaimed tax returns and how to tell if you've ever forgotten to file one.

Main Points

Even if your earnings are so low that you are not required to file a return, you might be entitled to a tax refund from the IRS.
Refunds are frequently due to low-income taxpayers who are eligible for the Earned Income Tax Credit.
You have three years from the tax filing deadline to submit a return and request a refund for that particular year.

How Tax Refunds Are Lost

Millions of tax refunds never get claimed. Taxpayers frequently fail to file tax returns because they are unaware that they will receive a refund. Due to your income, you might not have filed a tax return. Unless you make more than a certain amount during the tax year, you are not required to file a return. Your income in 2021 determines whether you must file a federal tax return in 2022. Depending on your age and filing status, different income levels are required. You must submit a tax return if your gross income is greater than the thresholds the Internal Revenue Service (IRS) establishes for your age and filing status.

$12,550 for singles.
Older than 65 and single: $14,250
Separate filing for married people: $5
$8,800 for the head of household
A household leader who is 65 years of age or older: $22,500
$25,100 for married people filing jointly
Married couples filing jointly with at least one partner age 65 or older: $26,450
If you're married and filing jointly, and you're both over 65, the amount is $27,800.
The equivalent of $25,100 for widow(er)
Eligible widow(er) and 65 years or older: $26,450

You shouldn't avoid filing a tax return just because you are not required to. Even if your income is less than these thresholds, you might still be due for a refund. The majority of the time, taxpayers who are exempt from filing a return would get a refund if they did. The IRS reported that as of 2019, there were reportedly unclaimed tax refunds totaling $1.4 billion for the 2015 tax year alone. Those refunds belonged to people who hadn't yet submitted their tax returns for that year.

These Unclaimed Tax Refunds Belong to Whom?

There are many things that could prevent someone from claiming their tax refund. But among those who are owed unclaimed returns, there are some patterns. The most typical people who fail to claim their IRS refunds include:

Students
Employees with income taxes withheld who are employed part-time or for a brief period of the year
Low-income self-employed individuals who pay estimated taxes but fail to file returns because their income is below the threshold
People who neglect to submit a final return for a deceased relative who is entitled to a refund
People who are eligible for the earned income credit but fail to file a return because their income is below the cutoff

Making an Earned Income Tax Credit claim

A tax credit is superior to a deduction for lowering your tax liability. Dollar for dollar reduces the amount of tax you owe, as opposed to a deduction, which only lowers the total amount of income subject to tax. If your household has a low income, the Earned Income Credit may be able to assist you by reimbursing some of the taxes you have already paid or by paying you even if you do not owe any taxes. Depending on your filing status, household income, and the number of children you have as dependents, you may or may not be eligible for this credit. The maximum tax credit for 2021 is $6,728. The IRS will send you the cash because it is refundable if you owe no taxes or a small amount compared to this limit. If you are qualified and fail to file a return to claim it, you might be depriving yourself of a sizable tax refund. Note: It should be noted that you must meet the requirements of the American Rescue Plan Act (ARPA) of 2021's special rule if you are claiming the Earned Income Tax Credit and your filing status is Married Filing Separately.

How to File a Tax Claim for an Unclaimed Refund

If the IRS owes you money, you might want to find out. First, make sure that you have filed tax returns for each of the last three years that you have had income by checking your records. Check the accuracy of your returns from the previous three years. Spend some time determining if you were entitled to the Earned Income Credit but failed to claim it. You might still be eligible for a refund even if you didn't file a return in any of the previous three years. You have three years from the filing deadline, which is typically April 15th, to file your income tax return and request a refund, according to the law. You forfeit your opportunity to receive your money if you don't file within that window of time. To obtain your tax returns from prior years, go to the IRS website or dial 1-800-TAX FORM (800-829-3676). If you missed a refund or were eligible for the earned income credit but did not claim it, claiming your refund might be as simple as filing returns for the previous three years. If you were expecting a refund but never got one, you can also use the Where's My Refund? The tool is on the IRS website. Checks for your tax refund are mailed to your last known address if you choose not to have direct deposit into your bank account. If you relocate and fail to update the IRS or the USPS with your new address, they may be returned to you by the IRS. Online forms like Form 8822, which are accessible online, can be used to update your address.