Tim’s Tax News on the Tenth – April 2021

The IRS announced that it estimates that unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 Form 1040 federal income tax return. The IRS estimates the midpoint for the potential refunds for 2017 to be $865.00 — that is, half of the refunds are more than $865.00 and half are less.

"The IRS wants to help taxpayers who are due refunds but haven't filed their 2017 tax returns yet," said IRS Commissioner Chuck Rettig. "Time is quickly running out for these taxpayers. There's only a three-year window to claim these refunds, and the window closes on May 17. We want to help people get these refunds, but they will need to quickly file a 2017 tax return."

In cases where a federal income tax return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a tax refund. If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. For 2017 tax returns, the window closes May 17, 2021, for most taxpayers. The law requires taxpayers to properly address mail and ensure the tax return is postmarked by that date.

The IRS reminds taxpayers seeking a 2017 tax refund that their checks may be held if they have not filed tax returns for 2018 and 2019. In addition, the refund will be applied to any amounts still 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.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2017. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (“EITC”). For 2017, the credit was worth as much as $6,318. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2017 were:

• $48,340 ($53,930 if married filing jointly) for those with three or more qualifying children;
   
• $45,007 ($50,597 if married filing jointly) for people with two qualifying children;
   
• $39,617 ($45,207 if married filing jointly) for those with one qualifying child, and;
   
• $15,010 ($20,600 if married filing jointly) for people without qualifying children.

Current and prior year tax forms (such as the tax year 2017 Form 1040, 1040-A and 1040-EZ) and instructions are available on the IRS.gov Forms and Publications page. Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2017, 2018 or 2019 should request copies from their employer, bank or other payer. Taxpayers who are unable to get missing forms from their employer or other payer can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. Alternatively, they can file Form 4506-T to request a wage and income transcript. A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return. Unfortunately, the transcript does not show state income tax withheld, so finding the original document is best for preparing your returns.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 29 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.

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Lavelle Law, Ltd. is registered with the Illinois Department of Financial and Professional Regulation as an approved continuing education provider for CPE for CPAs and Enrolled Agents. If your organization is seeking CPE courses in the area of Business Law, Innocent Spouse Relief, IRS Collections, Tax Scams (including ID Theft) or other areas in tax law that can be taught at your office, please contact me at thughes@lavellelaw.com