Neglectful or procrastinating consumers who have failed to file their taxes for more than a year have several options and can still obtain refunds despite their delay.
Taxpayers are still eligible for refunds until they have reached the three-year mark, but failing to file means paying penalties.
The failure to file penalty runs at 5% a month, and the penalty on underpayment runs at 0.5% each month, said Eric Green, an attorney with Green & Sklarz, a New Haven, Conn.-based boutique law firm.
"Filing as quickly as possible is in the taxpayers best interest," he said. "Refunds are also lost after three years."
Consumers who have lost their tax records such as 1099 or W-2 can obtain them from their former employers or the IRS by asking for the wage and income transcript online.
"If records are an issue, get them from the IRS so you know what was reported to the government under the taxpayer's social security number," Green said. "Nothing gets a return kicked out or audited faster than a mismatch with third party information."
If your former employer is out of business or not available, taxpayers can obtain their missing forms by going to IRS.gov and using the "Get Transcript Online" tool to obtain a Wage and Income transcript. A Wage and Income transcript shows data the IRS receives from forms such as the W-2, 1099, 1098 and Form 5498, IRA Contribution Information. The information from the transcript can be used to file their tax return.
Taxpayers who have neglected to file taxes for one, two, three or more years should file as soon as possible since there is not a statute of limitations for a failure to file, said Traci Kratish Pumo, managing director at BDO USA, a Chicago-based advisory, consulting and tax services company.
"People who have neglected to file should retain a tax advisor to assist them with filing missed returns and should look to file before receiving notice from the IRS that their return is missing," she said. "With certain exceptions, a claim for a refund when a return was never filed, may only be made two years from the time the tax was paid."
Failing to file taxes is not uncommon with at least 1 million taxpayers who chose not to file a 2013 federal income tax return, according to the IRS. These taxpayers, including students, are eligible to receive refunds of over $1 billion.
The unclaimed federal income tax refunds are still available for taxpayers to collect if they file their 2013 returns by April 18, this year's tax deadline.
"People across the nation haven't filed tax returns to claim these refunds, and their window of opportunity is closing soon," said IRS Commissioner John Koskinen in a statement. "Students and many others may not realize they are due a tax refund. Remember, there's no penalty for filing a late return if you're due a refund."
The IRS estimates the midpoint for these refunds is $763 with 50% which are over the amount and half which are less.
Once taxpayers exceed the three-year threshold, any refund money winds up as the property of the U.S. Treasury. For 2013 tax returns, taxpayers who are eligible must mail and postmark the tax return by April 18.
One caveat remains for individuals who believe they are owed a refund for the 2013 tax year - their refunds could be held up if they still have failed to file their 2014 and 2015 tax returns. Taxpayers who owe the IRS money for those subsequent years will have the 2013 refund allocated to those amounts owed to the IRS or a state tax agency. The 2013 refund could also be applied to offset unpaid child support or past due federal debts, such as student loans.
Neglecting to file a tax return means many people, including students and Millennials, could be missing out on the Earned Income Tax Credit (EITC). Even low income as well as moderate income workers could have been eligible for a credit up to 6,044. The EITC 2013 thresholds were the following:
-$46,227 ($51,567 if married filing jointly) for those with three or more qualifying children
-$43,038 ($48,378 if married filing jointly) for people with two qualifying children
-$37,870 ($43,210 if married filing jointly) for those with one qualifying child
-$14,340 ($19,680 if married filing jointly) for people without qualifying children