$1 Billion Tax Refund Deadline Looms

About one million people have not filed their tax year 2020 returns and might be missing out on refunds should they fail to do so before the May 17 deadline, according to the Internal Revenue Service (IRS).

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The agency estimates that more than $1 billion in refunds is still unclaimed because people haven't filed their tax return for 2020, the year the COVID-19 pandemic started. Typically, the filing deadline for people to claim old refunds falls around the tax deadline of April 15, but the IRS made an exception for the tax year 2020 because of the health emergency.

"The deadline is determined by the statute that prohibits the IRS from issuing a refund if a claim for refund—which can be an original return or an amended return—within the later of three years from the date of filing or two years from the date the tax was paid," Bill Smith, National Director of Tax Technical Services at CBIZ MHM's National Tax Office in Washington, D.C., told Newsweek.

"If someone did not file a 2020 return, the statute starts to run on the original due date of the return. Because of COVID, the IRS extended the original due date of 1040s in 2020 from April 15 to May 17," he said. "So the last day for filing a return for 2020 that requests a refund is three years from May 17, 2021, which is May 17, 2024."

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While there's no penalty for failure to file their claims for refunds if eligible, taxpayers might be missing out on quite a bit of cash should they miss the deadline.

"By missing out on filing a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2020," the IRS wrote. "The estimate does not include credits that non-filers may be eligible to receive. Credits include the Earned Income Tax Credit (EITC), the Recovery Rebate Credit or other credits that may be applicable."

It's not too late to file now. Smith reminded taxpayers that they can file a return at any time before the deadline. "If your return shows that you are due a refund, you are subject to the three-year rule discussed above," he explained. "If it shows an amount due, you will owe interest from the original due date until the amount is paid. And there may be penalties assessed."

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Those who miss the May 17 deadline to submit their 2020 returns won't be issued a refund, as the IRS is prohibited from doing so. "No appeals, no way to challenge in court, just out of luck. End of story, unfortunately," Smith said.

"The IRS knows it has payments attributable to SSNs [Social Security Number] where there is no corresponding 1040 on file," he added. "The IRS, as a result, knows there is a potential refund due. That is why it is trying to get the word out that those people need to file by May 17, 2024."