How to Avoid Unclaimed Tax Refunds

According to the Internal Revenue Service (IRS) itself, the IRS has more than $900,000,000 in unclaimed tax refunds—and that is just for refunds related to a single tax year!  How does that happen?  Unclaimed refunds are primarily caused by one or both of the following situations:

  • A taxpayer has taxes withheld from his or her paycheck, but has income less than the amount necessary to require an income tax return to be filed.  The taxpayer chooses not to file, and thereby gives up the ability to get his federal withholding back. (Keep in mind that the amount of a tax refund might even exceed the amount paid via tax withholding if you are eligible for Earned Income Tax Credit.)
  • The taxpayer filed a tax return and a check was mailed but, for some reason, mail delivery was not completed. This could be due to a bad address or a bad day by your postal carrier. Other possibilities include your name change, your divorce, or your decision to move.

While there’s no penalty for failing to claim a refund owed to you, there is a time limit as to how long you can wait before you ask for your money by filing a tax return.

For returns which have not been filed, you typically have three years from when the return was originally due.

So, you must file your 2011 return by April 15, 2014 to salvage your tax refund for that year.  Plus, to state the obvious, this is your money we’re talking about, so even if your income is less than the IRS income threshold you should still file your taxes if you:

  • Had federal taxes withheld
  • Qualify for refundable tax credits like Earned Income Tax Credit

How Can You Avoid an Unclaimed Refund?

One easy way to avoid an unclaimed refund is to always timely file your tax returns.  While filing a 2013 tax return now in order to get your refund will start the process of getting your money, if you failed to file the more recent 2011 and 2012 returns, your refund will likely be held up. So, get caught up and stay caught up.

Another way to make sure that you don’t miss out on your tax refund is to avoid a misdelivered refund check and receive your tax refund via direct deposit. You can do so right within your tax return.  Not only is a tax refund safer and easier with direct deposit, but it’s also faster than a paper check.

With an increasing amount of money at stake, and an increasing amount unclaimed, it has never been more important to file your tax return each year even if you earn low income.

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN Money.com, latimes.com, The Wall Street Journal, SmartMoney.com, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

Comments (5) Leave your comment

  1. IRS electronically sent my refund to the wrong bank, not mine, even though the routing number and account number on my e-filed Tax Return was correct. The bank sent the refund back to the IRS, but instead of checking my return to find out they screwed up the numbers, they just pigeon holed my refund. I have called 3 times
    to correct it but IRS just wait another 45 days, and if not File a complaint with the Tax Advocy Group. It is now 114 days since I e-filed.

  2. I got my DD sent to my account Feb 18 but it was returned to TT then they attempted to send my a check (This whole time-4 weeks- I thought my ACH was returned to the IRS so since I had moved I updated my address with them along with the USPS) The check was returned to TT on February 28 as undeliverable (since at the time I thought the IRS was getting it but since I had fees deducted it went to TT). I called TT when I found out that the funds were returned to them and they told me they could not issue another check or send another DD since they had tried and failed and I was told it was going to be sent to the IRS and they should have it within 10 days. Now I call 3/24 and am told that TT could potentially hold my funds for 12 weeks or longer and are unable to tell me when they will be sent to the IRS until they are actually sent. I am beyond frustrated with this company as I am told a different time frame from everyone or a general “well we don’t know”. I feel that this is somehow illegal for them to hold my funds for an undetermined amount of time. Why can’t they send them to the IRS immediately then? I understand TT must at this point send them to the IRS which will put an additional hold before sending the check but why do they have to hold my refund for this amount of time? I am so so so frustrated with this.

  3. I filed 012714 your site says I was accepted 012914 and sbbt says the something you also say I should have it before tomorrow well now my bars are missing with a 152 code and says still processing should I be worried why am I not getting an update could it be because of TurboTax I didnt pay to be stressed

    • Well I found my own answer and came up with the conclusion that TurboTax only for themselves and next year and years to come I will no longer have business with TurboTax I will take my taxes to someone who will be better help…thanks for ignoring my question and have a bless day

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