If you or someone you know hasn’t been filing their tax returns, now is a good time to get caught up.
Refunds of $1.4 billion are waiting to be claimed by individuals who have not filed.
There is a plethora of reasons why people don't file their tax returns. Some are frivolous. For example, some folks claim the 16th Amendment to the Constitution was not properly ratified while others claim the U.S. tax system is "voluntary." Others are more emotional, like those who expect to owe and have neither the money nor desire to pay. Some dodge tax returns because of lifestyle changes such as an illness, the death of a loved one or another major life change. Some people legitimately believe they have no filing requirement, and some simply never get around to this often tedious and time-consuming task.
The tax system is based in large part on third-party validation, so in most cases the Internal Revenue Service knows something about your tax situation whether you file or not. For example, employers submit payroll tax returns and W-2 forms to the government containing individual names, Social Security numbers and earnings. Banks and other financial institutions issue 1099 forms for taxpayers who earn interest, dividends and proceeds from the sale of stocks, bonds and other capital assets. Other 1099s are issued for rents received, non-employee compensation and other income. All this information and more is readily available to the IRS, and the folks there use it.
The IRS has the ability to prepare a substitute for return, or SFR, for any taxpayer. This is normally done by taking the information known to the IRS, making some assumptions about the taxpayer and calculating the taxpayer's tax liability for the year. This often results in an underpayment of taxes and generates a letter to the taxpayer with a proposed tax assessment that can become legally binding and legally collectible. Once the tax is assessed, the IRS has 10 years to collect, and it can be aggressive. These SFRs are often based on incomplete data and result in inaccurate balances due, so taxpayers in this situation should seek the assistance of an enrolled agent or other licensed tax professional to respond to these demands for payment.
What happens when the SFR calculation results in an overpayment of taxes? That's where it gets interesting. The IRS does not generally notify those taxpayers to let them know they may be due a refund. Instead it issues an annual press release notifying the general public that refunds might be available to taxpayers who have not filed. Taxpayers only have three years to claim a tax refund, and the press release usually goes out shortly before the refund statute of limitations is about to expire.
In mid-March, the IRS issued the press release for unclaimed refunds from 2015. According to the IRS, refunds of $1.4 billion are waiting to be claimed by more than 1 million taxpayers who didn't file their 2015 federal income tax returns. The median refund is $879, and taxpayers affected are in all 50 states and the District of Columbia.
Why is the press release related to tax year 2015? Because while IRS has 10 years to collect a debt, taxpayers only have three years to make a refund claim. That means time is running out, and taxpayers now have fewer than 30 days to claim these potential 2015 refunds, as the money becomes property of the U.S. Treasury on April 16, 2019 (or April 18 in Maine and Massachusetts).
If you or someone you know hasn't been filing their tax returns, now is a good time to get caught up. Taxpayers can still claim a refund from tax years 2015, 2016, 2017 and 2018, but time is running out. Now is the time tocontact Ed Sabelawski, get compliant and make sure money isn't being left on the table. The clock is ticking.
Jerry Gaddis, Contributor - https://money.usnews.com/money/blogs/my-money/articles/heres-why-you-should-file-a-tax-return?fbclid=IwAR3E2GJfAWue19oMi0Aa74x8jmmnAJiSMFBTK9qrnZGQDt1klox1I4OaMEE
Posted: to Wealth Management News on Mon, Apr 1, 2019
Updated: Mon, Apr 1, 2019
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