IRS Has $2 Billion for People Who Have Not Filed a 2001
Tax Return
WASHINGTON — Unclaimed refunds totaling more
than $2 billion are awaiting about 1.7 million people who
failed to file an income tax return for 2001, the Internal
Revenue Service announced today. However, in order to collect
the money, a return must be filed with the IRS no later than
April 15, 2005.>
The IRS estimates that half of those who could
claim refunds would receive more than $484. In some cases,
individuals had taxes withheld from their wages or made
payments against their taxes out of self-employed earnings but
had too little income to require filing a tax return. Some
taxpayers may also be eligible for the refundable Earned
Income Tax Credit.
The window is closing for 2001 refunds,” IRS
Commissioner Mark W. Everson said. “As soon as you send us
your tax return, you’ll get your money. But if you don’t file,
you won’t get anything.”
In cases where a return was
not filed, the law provides most taxpayers with a three-year
window of opportunity to claim a refund. If no return is filed
to claim the refund within three years, the money becomes
property of the U.S. Treasury. For 2001 returns, the window
closes on April 15, 2005. The law requires that the return be
properly addressed, postmarked and mailed by that date. There
is no penalty assessed by the IRS for filing a late return
qualifying for a refund.
The IRS reminds taxpayers seeking a 2001 refund
that their checks will be held if they have not filed tax
returns for 2002 or 2003. In addition, the refund will be
applied to any amounts still owed to the IRS and may be used
to satisfy unpaid child support or past due federal debts such
as student loans.
By failing to file a return, individuals stand
to lose more than refunds of taxes withheld or paid during
2001. Many low-income workers may not have claimed the Earned
Income Tax Credit (EITC). Although eligible taxpayers may get
a refund when their EITC is more than their tax, those who
file returns more than three years late would be able only to
offset their tax. They would not be able to receive refunds if
the credit exceeds their tax.
Generally, individuals qualified for the EITC in
2001 if they earned less than $32,121 and had two or more
qualifying children living with them, earned less than $28,281
with one qualifying child or earned less than $10,710 with no
qualifying child.
Current and prior year tax forms are available
on IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).
Taxpayers who need help may also call the IRS help line at
1-800-829-1040.
State-by-state estimates for individuals who
failed to file a 2001 return with a refund due are
below.
Recent Changes May Affect Your 2004
Taxes
Some recent tax law changes are effective for the 2004 Tax
Year. If these items affect you, be sure to get the details
when you prepare your tax return.
Educators’ Deduction — This had expired at the end of 2003,
but was restored for two more years. IR-2004-124 has more
information.
Clean Fuel Vehicle Deduction — The maximum amount of this
deduction was scheduled to drop this year and next, but has
been retained at the $2,000 level through 2005. IR-2004-125 has information on this
deduction and the newest vehicle to qualify for
it.
Child Tax Credit — Taxpayers with a credit amount more than
their tax could get a refund of the difference, up to 10% of
the amount by which their 2004 taxable earned income exceeds
$10,750. This percentage was raised to 15% for 2004, meaning a
larger refund for many of these taxpayers.
Combat Pay — Some military personnel receiving combat pay
get larger tax credits because of two law changes. The new law
counts excludable combat pay as income when figuring the Child
Tax Credit and gives the taxpayer the option of counting or
ignoring combat pay as income when figuring the Earned Income
Tax Credit. Counting combat pay as income when calculating
these credits does not change the exclusion of combat pay from
taxable income.
For more about the effect of excludable
income on the EITC, see Q&A-37 in Miscellaneous Provisions -
Combat Zone Service.
For more details on combat
pay, see Military Pay Exclusion – Combat Zone
Service
Sales Tax Deduction — Taxpayers who itemize deductions
will have a choice of claiming a state and local tax deduction
for either sales or income taxes on their 2004 and 2005
returns. Publication 600, Optional State Sales Tax
Tables (PDF
93K) provides tables to use in determining the
deduction amount, relieving taxpayers of the need to save
receipts throughout the year. Sales taxes paid on motor
vehicles and boats may be added to the table amount, but only
up to the amount paid at the general sales tax rate. Taxpayers
will check a box on Schedule A, Itemized Deductions, to
indicate whether their deduction is for sales or income taxes.
For more details on the sales tax deduction, see news release
IR-2004-153.
New Law Encourages Tsunami Relief Contributions —
Contributions made to qualified charities to help victims of
the Tsunami can be deducted for tax year 2004 even if they are
made in January 2005, under a new law enacted on Jan. 7.
Expense Limit for SUVs — Businesses should be aware of
a change regarding the deduction for certain sport utility
vehicles (SUVs) placed in service after Oct. 22. Under
the American Jobs Creation Act of 2004, businesses cannot take
a first-year deduction of more than $25,000 for an
SUV. The business would depreciate the remaining cost.
(The limit for vehicles placed in service before Oct. 23 was
$100,000.) The new limit does not affect other types of
property where the taxpayer decides to expense the cost
instead of depreciating the property.
Sale of Personal Residence Acquired in a Like-kind Exchange
— Taxpayers who convert rental property to a principal
residence should know that a tax law change may
limit their ability to exclude gain on the sale of that
residence if they obtained the property through a like-kind
exchange. Generally, a taxpayer can exclude up to $250,000 of
gain on the sale of a home, provided the individual has owned
and used it as a principal residence for two out of the five
years before the sale. The exclusion is $500,000 for a married
couple if both meet the use test. The American Jobs Creation
Act of 2004 does not allow any exclusion if the taxpayer sells
the home within five years of acquiring the property through a
like-kind exchange. The new law applies to sales
after October 22, 2004.
Deduction for Discrimination Suit Costs — A new
deduction is available for those who pay attorney’s fees and
court costs in connection with discrimination
suits. Taxpayers can take the new deduction whether they
itemize or not. The deduction cannot exceed the amount
includible in income for the year on account of a judgment or
settlement resulting from the discrimination claim. Generally,
personal legal expenses are not deductible, but an employee
who incurs legal expenses related to doing or keeping his job
could deduct these expenses on Schedule A as a miscellaneous
itemized deduction. However, under The American Jobs
Creation Act of 2004, an individual with legal fees and court
costs arising from a discrimination suit may deduct the costs
directly from income on the front of the tax return; this is
known as an above-the-line deduction.
Under this new
deduction, amounts paid for attorney’s fees and court costs
are deductible in computing alternative minimum tax, and are
not subject to the 2 percent floor on miscellaneous itemized
deductions or the overall limitation on itemized
deductions. The Act, signed into law on Oct. 22, 2004,
describes the discrimination claims qualifying for this new
deduction. Only costs paid after Oct. 22, 2004, for
judgments or settlements occurring after that date qualify for
this deduction. |