Your Chance to Collect $1.3 Billion

No, this isn't one of those email scams

By Kaye A. Thomas
Posted March 4, 2009

IRS is ready to send out the checks.

Okay, I'll admit this isn't $1.3 billion for you individually. It's $1.3 billion for you as a group: U.S. taxpayers. The IRS sent out its annual reminder about unclaimed refunds, and that's the number for 2005.

Tempus Fugit

Why do we care about unclaimed refunds from 2005? Because the time for claiming them is about to expire. Generally, if you had an income tax refund coming for 2005 and never claimed it, you need to get that return in the mail by April 15, 2009 or kiss the money goodbye.

So, take a moment to think about what you were doing in 2005. Were you, for example, a student who worked in the summer, had taxes withheld, and never got around to filing a return? Chances are pretty good you didn't earn enough to owe any tax, and that's good. It means you aren't in any trouble for failing to file on time, and filing now won't get you in trouble. What's more, if you file your 2005 return now, the IRS will cheerfully send you a refund of the amount of federal income tax that was withheld from your pay.

Sadly, the refund won't include the social security tax that was withheld from your pay, and that may be more than half of what was withheld. But the other part, the income tax withholding, comes back to you if your total income for the year isn't enough to require you to pay tax.

Even if you earned enough to pay tax, there's a good chance the amount of withholding is more than the amount of tax you owe, so you could still have a refund coming.

Oh, and while you're at it, this would be a good time to think about whether you should have filed for 2006, or 2007.

What to do

If you're in this situation, you'll need to lay your hands on the proper tax forms for the year you didn't file. They're available from this page on the IRS website. You'll also need to locate Forms W-2 for the year in question, or contact the place where you worked and beg them for a copy.

Is it worth it?

Some people have large refunds coming. I think it's a good idea to clean up a past year even if the refund is relatively small, unless you're in a situation where you know you didn't earn enough to have a filing requirement and it would be a big hassle to pull the return together. Filing for that refund is the kind of thing a competent, well organized person would do, and that's you, isn't it?