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Americans have one week to claim $1.5 billion in tax refunds - here’s how you can claim yours

Americans have one week to claim $1.5 billion in tax refunds - here’s how you can claim yours
(Image credit: Pixabay)

American taxpayers have been warned they have one week left to claim back more than $1.5 billion in tax refunds relating to the 2016 tax year. According to the Internal Revenue Service (IRS), around 1.4 million individual taxpayers in the U.S. who have not filed a 2016 federal income tax return are owed money, and will miss out if they do not file by July 15. 

As a result of the coronavirus pandemic, all taxpayers have been afforded an extra three months in which to dust down the best tax software this year, with the IRS shifting the original tax deadline for 2019 returns back from April 15 to July 15. Despite suggestions that the deadline could be extended further, the IRS recently confirmed July 15 as the final tax filing date. As a result, taxpayers now have only a week in which to get their tax returns in order, unless they ask the IRS for a three-month extension, which they are entitled to do. 

However, for those filing tax year 2016 returns and claiming refunds for that year, there is no additional leeway to be had beyond July 15. The IRS normally allows most taxpayers a three-year window of opportunity to claim a tax refund for a given tax year, and if they fail to file within that time, the money they are owed becomes the property of the U.S. Treasury.

"The IRS wants to help taxpayers who are owed refunds but haven't filed their 2016 tax returns yet," said IRS Commissioner Chuck Rettig. "Time is quickly running out for these taxpayers."

Americans have one week to claim $1.5 billion in tax refunds - here’s how you can claim yours

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How big might the tax refund be?

The IRS says the midpoint for outstanding 2016 refunds is $861, meaning half of the refunds are for more than this amount and half are for less. With the finances of many American households currently stretched due to the economic fallout of COVID-19, the sums of money involved could almost certainly be put to good use by most. 

While there is no penalty for filing late when a refund is involved, those seeking a refund for 2016 are warned that their checks may be held if they have not filed tax returns for 2017 and 2018. In addition, it is confirmed that the refund will be applied to any amounts owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

Those who are yet to file for 2016 are also reminded that they could lose more than just their refund of taxes withheld or paid during 2016. In particular, it is noted that many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC), which for 2016 was worth as much as $6,269. However, people can't receive the benefit of refundable credits - or other tax breaks which might result in a refund - unless they have filed. 

For 2016, the EITC income thresholds were: 

  • $47,955 ($53,505 if married filing jointly) for those with three or more qualifying children;
  • $44,648 ($50,198 if married filing jointly) for people with two qualifying children;
  • $39,296 ($44,846 if married filing jointly) for those with one qualifying child, and;
  • $14,880 ($20,430 if married filing jointly) for people without qualifying children.

In terms of other money you may be due, the IRS points out that the payment of coronavirus stimulus checks also depends on the filing of past due tax returns. 

Which states are owed the most money?

While taxpayers across the U.S. are owed money in the form a tax refund, some states play host to more people who are entitled to a refund than others. 

Top 10 states with the most individuals who may be due 2016 income tax refunds - Source: IRS
StateEstimated number of taxpayersMedian potential tax refund
Texas143,400$898
California130,600$816
Florida99,000$874
New York70,300$958
Pennsylvania55,200$919
Ohio52,900$841
Illinois51,700$909
Georgia48,600$792
Michigan46,600$853
North Carolina44,900$833

How do I claim a past year tax refund?

If you need to file a prior tax year return, contacting the IRS should be the first step, to check what it is you need to provide and for what years. If you have several past-due returns outstanding, you might need to file for the current year and past six years, but it will be down to the IRS to decide. 

While the IRS website will have copies of most prior tax year forms, completing the process alone might prove overwhelming to some. Using a tax preparer is one alternative, but a cheaper way to take the stress out of filing is to use tax software, particularly as starter packages are usually free. Such software can also speed up the tax filing process and improve the accuracy of returns, something that the half of Americans who admit to making tax-filing errors will appreciate. 

Americans have one week to claim $1.5 billion in tax refunds - here’s how you can claim yours

(Image credit: Pixabay)

If you have an income under $69,000, the IRS also partners with some providers who will help prepare your tax returns at no charge - these solutions tend to let you file the Form 1040 and facilitate the most common tax breaks. If your situation is a little more complicated, or you’re in need of some extra support, paying for the additional services provided by the top tax software packages will likely be worth your while.  

While the option to correct your tax return online is about to be introduced, the IRS does not currently support filing prior year tax returns electronically. To meet this year's deadline, the law therefore requires taxpayers to properly address, mail and ensure an outstanding tax return is postmarked by the July 15 date. If you use tax software, it will lead you through the filing process before you can print your return out and mail it to the IRS. Some of the best tax software providers have physical offices too, which you can visit if you're in need of face-to-face support.