Refund News: Some Good, Some Bad

The Good

The IRS is sitting on $917 million in refunds for people who haven’t yet filed their 2009 tax return.  They made the announcement today via IRS Newswire.  See IRS Newswire Issue Number IR-2013-29.  If you’re wondering why they waited until 3 years later to get the word out, well it is with good reason.  As you know, if you are due a refund, the only way to claim it is to file a return; the IRS won’t just write you a check on its own initiative.  But even if you are due a refund, you can only delay so long before the money becomes property of the US Treasury.  By law, taxpayers have 3 years from the date that the return is due to file and claim a refund.  2009 taxes would have been due on April 15, 2010, so the three year mark is coming up in about 30 days.  Over 984,000 people didn’t file their 2009 return, so many of the refunds are fairly small.  But the IRS estimates that over half of the unclaimed refunds are over $500.  Therefore, it is well worth the time and expense to file it, particularly if you can claim the Earned Income Tax Credit (EITC) for that year.

The Bad

The IRS swore that delaying the start of tax season would not result in delayed refunds, but this may have been a promise that was impossible to keep.  On March 12, the IRS released the following statement:

The IRS is aware of a problem with a limited number of software company products that affected some taxpayers filing Form 8863, Education Credits, between Feb. 14 and Feb. 22. The problem resulted in those tax returns requiring additional review by the IRS.

What this means for taxpayers who expect a refund is they may have to wait 4-6 weeks longer than previously expected as the IRS looks more closely at their Form 8863.  90% of those who claimed the education credits will get their refund right on time.  The software glitch was with H&R Block, so it is only the 8863s filed by that company that are subject to further IRS review.  I guess the silver lining here is with respect to balance due returns. Tax assessments will presumably be delayed as well, which could give people some extra time to figure out how to resolve their tax debt.