It is a rare moment when the U.S. Internal Revenue Service (IRS) calls out for taxpayers to collect money rather than pay. The IRS has approximately $760 million worth of refunds to be distributed amongst at least 918,600 taxpayers from different states who did not file their tax returns for the year 2010.
AG Tax professionals advise individuals who did not file a tax return in 2010 due to low income, or were/are unaware of certain eligible refundable credits, should immediately consult a tax professional to verify if they could be a refund recipient, and accordingly file a personal income tax return for 2010 tax year by April 15, 2014 in order to obtain the refund; otherwise it will be redirected to the U.S. treasury.
Possible Recipients of the Refund
While it is recommended that taxpayers who did not file in 2010 prepare and file a 2010 return to be up to date on their taxes (regardless of whether a refund is due), there are certain circumstances where filing and receiving a refund are more likely. Mentioned below are certain types of taxpayers are more likely to be entitled to a refund, which is estimated to be an average of $571 per eligible taxpayer.
– Those who were working on a part-time basis or were earning low income that would not trigger taxes, and thus did not file a tax return. Every employer is required to withhold taxes from their employees’ salaries even if the income is an insignificant amount and probably not taxable after applying deductions and qualified contributions. The withheld taxes are later refunded if no taxes are due, but in order to claim the refund(s) the IRS requires the individual to file a proper, complete tax return for that particular tax year.
– Married couples or singles who were/are eligible for the Earned Income Tax Credit (EITC) because of their income levels and their dependents status, but did not claim it as they were unaware of the credit or of the fact that EITC is a refundable credit which can be claimed even if no taxes are due; provided one files a tax return along with legitimate supporting documentation for the credit.
Following are the income thresholds and dependent(s)/qualifying# children status for 2010:
| No. of Qualifying Children | Tax Filing Status | Adjusted Gross Income (AGI) Threshold |
Maximum EITC |
| None | Single |
$13,460 |
$457 |
| Married Filing Jointly |
$18,470 |
||
| One | Single |
$35,535 |
$3,050 |
| Married Filing Jointly |
$40,545 |
||
| Two | Single |
$40,363 |
$5,036 |
| Married Filing Jointly |
$45,373 |
||
| Three or more | Single |
$43,352 |
$5,666 |
| Married Filing Jointly |
$48,362 |
#Any related child(ren)/grandchild(ren) (birth, adopted, foster, step, or a family member’s) below the age of 19 or 24 if a full-time student. There is no age bar if the child is disabled.
If a U.S. taxpayer had an AGI within the threshold limits in 2010 with qualifying dependent child(ren) but did not file a tax return, he/she should consult a tax practitioner to explore the likelihood of being able to claim a refund. (Read: Earned Income Tax Credit and Required I.R.S. Due Diligence for more info.)
There could be other possible refundable credits for taxpayers, specific to the year 2010, such as: Adoption Tax Credit, Child Tax Credit, American Opportunity Credit, Homebuyer Credit, Health Coverage credit, Making Work Pay Credit, and etcetera.
Tax Consequences
There are no penalties for filing a late tax return if there are qualifying receivable refund(s) and no tax dues; however, an individual earning income (salary, profit, gain, dividends, or interests), or eligible for credits/deductions should file a tax return in order to prevent any current or future refunds from being withheld by the IRS and to avoid other potential tax complications.
The IRS is continuously reminding taxpayers eligible for tax year 2010’s refund to file their tax returns for 2011 and 2012 (if they were missed), as the IRS may withhold the refund check if income tax returns have not been filed in these years. In addition, the refund could be applied towards any past federal or state tax dues, federal debts such as student loans, or to offset unpaid child support.
Approaching Close Date
A three-year window is provided by the IRS to claim a refund after which a taxpayer loses his right to claim it, and the refund passes on to the government coffers.
Taxpayers can get in touch with the IRS to obtain current and prior year tax forms and/or contact their employer/bank/etc. for copies of missing/misplaced documents (such as: Form W-2, 1098, 1099 or 5498) which may be required to be submitted while filing tax the late returns. One could also meet with a tax professional for assistance. A complete and accurate tax return is necessary for IRS to process the refund claim with ease. The filed tax return should be mailed and postmarked to the IRS and received no later than by April 15, 2014.
AG Tax LLP Can Help
If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canadian, and other international tax laws.
We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
