Americans Are Running Out of Time to Claim $1 Billion in Tax Refunds

Americans have a little more than two weeks to claim tax refunds before they disappear from Internal Revenue Service (IRS) records.

Taxpayers have more than $1 billion in unclaimed refunds from the tax year 2020, but the IRS will not hold the payments for Americans after May 17.

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Many Americans who didn't file taxes in 2021 never saw their refunds from the year prior, and the IRS also held onto a 2020 recovery rebate credit for millions of taxpayers. Since the average unpaid refund is $934, that means many could lose their chance to claim thousands or more from the government.

"The average unpaid refund is over $900, and with inflation affecting virtually every aspect of the consumers' lives, that money could certainly come in handy if you haven't already filed," Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.

The IRS estimates that nearly 940,000 taxpayers still haven't claimed their refunds from 2020, and the agency only keeps the refunds in their records for three years. That means the refunds will expire after May 17 and then be transferred to the U.S. Treasury.

The IRS already extended the shelf life of the refunds because the deadline to file taxes in 2021 was moved from April 15 to May 17. However, the three-year mark is fast approaching, and Americans need to act now or risk losing out on the money.

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To claim your tax return, you can use online tax software for help, but you'll need to actually file the tax returns on paper since it's for a previous year. The IRS allows Americans to print out and mail 2020 tax returns to your individual regional IRS office before claiming the money.

You just need to make sure your 2021 return is postmarked by May 17 in order to qualify for the refunds.

So far, the IRS does not allow you to check if there's still money being held for you before filing your tax return for a prior year. The only way to find out is to file a return and then see if the IRS sends out a refund.

However, you can calculate the amount of any missing recovery rebate credit by using tax prep software of the Form 1040 Recovery Rebate Credit Worksheet. You'll just need to know the tax years and amount for the stimulus checks you already received.

"Adding to this particular refund is the 2020 recovery rebate credit, which was implemented to benefit taxpayers during the pandemic-era of finance," Beene said. "Every year of unpaid tax refunds is important, but due to additional credits and rebates issued in 2020, this would be an exceptionally bad one to miss."

To actually file your tax return from 2020, you'll likely need all W-2s, 1098 and 1099 forms from that year.

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Keep in mind, the IRS can offset your tax refunds and use the money for past federal or state taxes you never paid. It also can go to child support, spousal support or even unpaid student loans.

"Americans have so many unclaimed tax dollars due to the pandemic and the aftermath of tax credits and filing delays, which left a whole host of refunds yet to be processed, or tax filings to be neglected," finance expert Kevin Thompson, the founder and CEO of 9i Capital Group, told Newsweek.

"The economy was not the only thing shut down. The IRS was working with limited staff as well. Of course, as you know, the IRS is antiquated in its technology and often working with less than necessary staff, so they are likely back-logged on processing tax returns."