Posted: Sarah Nieschalk | April 5, 2016

News

Are You Due a Tax Refund from a Previous Year?

There are a number of reasons why you might have skipped filing a tax return. Perhaps you were traveling for work, experiencing a family hardship or maybe you just forgot. Whatever your reason for not filing, though, it's important to consider what you might be missing out on.

If you failed to file for one or more of the last three years, it's entirely possible that you're due some money back. But beware: the IRS allows only so much time for you to file and claim your money. If you wait too long, it might just be gone forever.

Timeframe to File

Assuming that you were due money back for a previous year but did not file, you have three years from the original filing deadline to do so. So, if you skipped 2013's return, you have until April 15th, 2017 to catch up since that return was due April 15th, 2014. Provided you meet the threshold to file, you'll receive the full sum of your tax refund.

Penalties

You're probably well aware that if you owe a tax bill and don't file by the deadline, you're going to get hit with a penalty. However, if you're due a refund, there is no penalty for filing late. Even if you're submitting your return nearly three years after it was due, you won't be penalized and your entire refund will be intact.

Exceptions

There are a few instances which would result in you not receiving a refund from a previous year. In the event that you have a federal or state tax balance, some other type of government debt or delinquent child support payments, your refund can be partially or completely taken. This is known as an offset, and will result in the balance in question being satisfied before you receive any portion of your refund. If what you owe is greater than the sum of your refund, the whole amount will be taken and you will be left to pay the difference.

After the Third Year

Once your three-year window has closed, you will not be able to retrieve your refund. Your money will belong to the U.S. Treasury and any right you have to the balance is forfeited. If you're uncertain whether you skipped over a year and the deadline is approaching, you'll want to review your tax records to avoid an expensive lesson in procrastination.

Financial Considerations

Before you decide that filing your return - even if it means a tax refund - still isn't worth your time, make sure you take a close look at what you're giving up. For instance, if you are a lower-income employee, you may qualify for the Earned Income Tax Credit. This one concession can substantially boost the amount of your tax refund, entitling you to more than you realize.

Professional Consultation

The smart move may be to talk to a licensed tax professional about filing back tax returns. He or she can provide an estimate of how much you stand to earn, along with any consequences from failing to file. For while you want any refund you're due, you also want to avoid an IRS issue from an unpaid debt.
<--Back to Debt Blog                       Next Post: What to Do If You Miss the Filing Deadline -->

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Written by Sarah Nieschalk

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