SAN FRANCISCO – Time is running out for millions of taxpayers to collect an estimated $2 billion they left on the table in 2002.
About half of the approximately 1.7 million people that failed to file a federal return that year could collect more than $570, the IRS estimates.
There's still time: Anyone owed a refund has three years from the date the return was due to file and collect a refund. For tax year 2002, that three-year clock runs out on April 17 this year. Taxpayers eligible for a refund don't owe penalties or interest.
Taxpayers fail to file because they're afraid they owe money or because they're busy, on the move, or suffer a personal crisis, said Cynthia Jeanguenat, an enrolled agent and tax preparer in Virginia Beach, Va.
"People get scared they'll owe money. They don't realize that maybe they'll have a refund," she said. "Even people who have a small business — there still might be a refund there if maybe they're married and the spouse was working and there was some W-2 withholding.
"Lately, I've had quite a few people who didn't file last year and this year. One was a divorce. One started a business and it took off like crazy. He never got around to filing and before you know it the year is over," she said.
As time passes, it just gets harder to go back and file, some said. "They do it one year and they think maybe no news is good news," said Frank Degen, an enrolled agent in New York.
One of Degen's new clients is a taxpayer who didn't file for 11 years. He was eligible for a refund each of those years.
"He's going to lose on eight of them, because he's past the three-year statute," Degen said.
That taxpayer forfeited about $32,000 in lost refunds.
Lost paperwork? Not a problem
If you're worried about finding paperwork needed to file your return, consider contacting the IRS. With Form 4506, you can request the information on W-2s and 1099s that employers and others provided to the IRS that tax year.
But with just over a month to the filing deadline for a 2002 refund, it makes sense to contact an enrolled agent or tax expert who, with a power of attorney, may be able to gather that information quickly online. Otherwise, the IRS says it takes up to 45 days to provide that information to taxpayers.
As an enrolled agent, Jeanguenat said, after clients fill out a power of attorney, she can then "turn right around and pull a transcript and have all the information of what's been filed on them," she said.
"For most people, that is a good majority of the information" they need to file an old return, she said.
Owe money? File that return
Even those who owe money are better off filing rather than postponing longer.
"If you do have a balance due, the IRS has an installment plan," Jeanguenat said. "If you ignore it, it's just going to continue to accrue," she said.
Those who haven't heard from the IRS even after failing to file have a good chance of collecting a refund, she said. "If you haven't already received a letter, chances are you do have a refund," Jeanguenat said.
"They won't normally send a letter to someone if by their calculations you have a refund coming. They will only let you know if you possibly owe money," she said.
Even taxpayers who get a letter saying they owe money to the IRS should consider hiring a professional.
"The IRS will do a 'substitute for return,' or SFR, if they believe from the information they have that you owe them money. They will send you a nice letter saying, 'here is the tax return we have compiled. If you agree, pay this money. If you don't, file a return and tell us why,'" Jeanguenat said.
But since the IRS won't have the information necessary to itemize for you, you may in fact be able to file a return that nets you a refund.
"I have done those for people who have received those letters and they find out they have a refund," Jeanguenat said.
Not required, but still a good idea
Even those who aren't required to file because their income is under a certain limit should consider doing so if they earned some income. [Who the IRS says should file].
"If you have any federal tax withheld, you would want to reclaim it even if you're under the filing requirements," Degen said.
"You see that a lot with teenagers. They may be dependents of their parents, with a summer job where they earn $2,000. They don't have to file, but they may have had some federal tax withheld so they'll file 1040EZ and get their money back."
Plus, even those who don't expect a refund might be eligible for the Earned Income Tax Credit, and thus collect some money.
In 2002, taxpayers qualified for the EITC if they earned less than $33,178 and had more than one qualifying child living with them, earned less than $29,201 with one qualifying child, or earned less than $11,060 with no qualifying child, according to the IRS.
Exception to the deadline
Some taxpayers can claim refunds even after the three-year deadline, but they have to be able to prove they were "financially disabled" for at least 12 months, Degen said.
"A classic example of that would be someone was an alcoholic for a long period of time, or [suffered from] depression," he said.
You must provide some type of evidence. "You can't just say 'I was unable to do it because I'm financially disabled.' You'd need a letter from a therapist or something like that."
Current and prior tax forms are available under Forms and Publications on the IRS Web site at www.IRS.gov.
Or call 1-800-TAX-FORM (1-800-829-3676).
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