IRS is trying to give away money

Do you have friends or relatives who have failed to file income tax returns in prior years? The IRS may be holding refunds meant for them.

Some people whose withholding exceeds their tax liability don't file tax returns.

As a result, the IRS is holding over $1 billion in unclaimed refunds relating to calendar year 2008 alone. The IRS is waiting for more than a million people to file their 2008 federal income tax returns to claim their refunds.

Here's the rub: If taxpayers have yet to file their tax returns for 2008 and the IRS owes them refunds, the refunds will be gone after April 17, 2012. If a return is filed after that date, the IRS is not allowed to process the refund claim because refunds must be claimed no later than three years after the original due date of the tax return.

Taxpayers seeking refunds must properly address, postmark and mail their returns by April 17. No penalties are assessed for filing late returns that qualify for refunds.

Some people may be entitled to a refund greater than the tax withheld from their paychecks. Those who did not receive an economic stimulus payment in 2008 may qualify for the Recovery Rebate Credit. In addition, many low- and moderate-income workers may not have claimed the Earned Income Tax Credit.

Unfortunately, traffic flows only one way on this street. Although a taxpayer cannot claim a refund relating to 2008 after April 17, 2012, the IRS can still assess additional taxes owed. The three-year period that the IRS has to assess additional taxes does not begin until a return is filed.

Read more in Information Release 2012-26.

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