If you don’t file your taxes and owe the IRS money, serious consequences can ensue. You could face very costly penalties for failing to file a tax return when you owe money from that tax year.
But if you’re due a refund from the IRS, there’s no penalty for failing to file a return. In that case, the IRS doesn’t mind, because it gets to hang onto your money — but that doesn’t mean you should let it.
The IRS isn’t going to chase you down
It’s a big misconception that if you’re owed money from the IRS in refund form, the agency will find you and make sure you get the funds you’re due. Not so. If you want a tax refund, you need to file a tax return to get it.
Now some people are exempt from filing tax returns because their income is lower than the standard deduction. But even if you’re not required to file a tax return, it could pay to do so for refund purposes.
If you’re a lower earner, you may, for example, be entitled to a valuable tax credit called the Earned Income Tax Credit. It’s a fully refundable credit that could result in a multi-thousand-dollar refund. But you won’t get that refund if you don’t ask for it.
What if you didn’t claim a previous tax refund?
It may be that you missed the boat on filing a tax return for a previous year that may have otherwise resulted in a refund. If that’s the case, you may not be out of luck.
The IRS gives you three years from a given return’s filing deadline to submit that return and snag your refund. For example, 2023 tax returns are due this year on April 15. But that technically means you have until April 15, 2027 to submit that tax return.
Of course, seeing as how many Americans are living paycheck to paycheck without any money in a savings account, waiting that long makes little sense — especially when you may be eligible to file your taxes for free. This year, you’re eligible to file for free if your adjusted gross income is $79,000 or less. And if you think you can’t manage the process alone, you may be eligible for free help.
The IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer help for certain filers. Usually, for VITA, you need to earn $64,000 or less, have a disability, or have limited English-speaking ability. But if you feel you need help with your taxes, don’t hesitate to explore these programs to see if you qualify. You may also find a local tax preparer who’s willing to help you at a greatly reduced rate.
A tax refund is something you shouldn’t give up. That’s money that could do a lot of good for your finances. So if you’re not sure you’re due a refund this year, go through the motions and see. You may find that the IRS owes you a nice sum of money thanks to the various tax credits that are made available to filers.
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