Time is running out

The IRS recently released a notice that $1.1 billion (yes, with a B) in refunds may be waiting for people. They estimate that 1.1 million people did not file a federal income tax return for 2007 and may be owed money. To collect the money, a 2007 tax return must be completed and mailed (postmarked) by April 18, 2011.

Who are these people? They are likely employees who had taxes withheld from their pay who did not make enough to be required to file a tax return. This includes high school and college students with part-time jobs. Or they might be elderly people who had some withholding from a pension but also didn’t have enough taxable income to file. Or maybe they just haven’t gotten around to filing and know that their withholding was sufficient to cover any tax due. Rarely is withholding EXACTLY equal to tax due, so they may actually be due a refund.

Even if there is no prospect of refund, a person may want to file anyway. Until a return is filed, the three-year statute of limitations for the IRS to start an audit won’t begin. Maybe there was a capital loss from investments that can be carried forward to offset future capital gains. Or maybe there was a net operating loss from a Schedule C business that can be used to offset future taxable income.

There is no time limit for filing in one of these scenarios, but time is running out if you are due a refund. The luck o’ the Irish won’t help you – the IRS will not issue a refund without a tax return. Don’t let April 18th pass without considering your claim.

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