Tax Lawyer's Blog

Here is the full text of IR-2010-24, dated March 2, 2010:

Washington — Unclaimed refunds totaling more than $1.3 billion are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006, the Internal Revenue Service announced today. However, to collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010.

The IRS estimates that the median unclaimed refund for tax-year 2006 is $604.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury.

For 2006 returns, the window closes on April 15, 2010. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. Though back-year tax returns cannot be filed electronically, taxpayers can still speed up their refunds by choosing to have them deposited directly into a checking or savings account.

The IRS reminds taxpayers seeking a 2006 refund that their checks will be held if they have not filed tax returns for 2007 or 2008. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

When the IRS says it has a refund waiting for you it has based its assumption only on the information it has available to it: Namely, via Forms W-2 and 1099. But if you are thinking about filing an old tax return hoping to get a refund, consider this: You must include on your tax return your taxable income from your worldwide sources regardless of whether your receipt of that income was reported to the IRS.

If you have income from unreported sources and haven’t filed a tax return, you could prosecuted for intentional failure to file. In addition, if the unreported income and underpaid taxes are sufficient, the IRS might even pursue tax evasion charges against you.

So my advice to you is this: If you think you overpaid your withholding taxes, file a tax return immediately to claim your refund. If you have additional sources of income other those that have been reported to the IRS, file your tax return immediately to avoid criminal prosecution.

In other words, either way, file!

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