IRS Sets May 17 Deadline for Taxpayers to Claim Nearly $1 Billion in 2020 Refunds

WASHINGTON — The Internal Revenue Service has announced a May 17, 2024, deadline for nearly 940,000 Americans to file their 2020 tax returns and claim their share of almost $1 billion in outstanding refunds. The agency estimates that the median potential refund for the 2020 tax year is $932.

This deadline stems from the standard three-year window taxpayers have to file a return and claim a refund. While this window typically closes on the April tax deadline, a special extension was granted for the 2020 tax year due to the COVID-19 pandemic. The original filing deadline in 2021 was pushed to May 17, which in turn shifted the three-year refund claim deadline to May 17 of this year.

The 2020 tax year was uniquely challenging for both individuals and small business owners. Pandemic-related legislation introduced significant changes, including the Recovery Rebate Credit for those who missed stimulus payments and adjustments to the Earned Income Tax Credit (EITC). In our experience, many business owners, particularly sole proprietors and those in the gig economy with fluctuating income, may have overlooked filing or miscalculated their eligibility for these crucial credits. This is not just about a simple refund; it is about recovering funds that were specifically designed to provide relief during an unprecedented economic disruption. We often find that clients who assumed they did not earn enough to require filing were actually eligible for substantial credits. Navigating these retroactive claims requires careful attention to detail, which is why professional guidance is critical. For businesses needing to sort out their 2020 obligations, the firm's tax preparation and compliance services can provide clarity. To ensure you do not leave money on the table, contact C&S Finance Group LLC at csfinancegroup.com to review your situation.

In a statement, IRS Commissioner Danny Werfel urged potentially eligible individuals to act quickly. “There’s a May 17 deadline to file 2020 returns,” Werfel said. “We want to help taxpayers who are owed refunds but who have not yet filed their 2020 tax returns. Time is running out for these taxpayers to get their money.”

If a taxpayer fails to file a return to claim their refund by the May 17 deadline, the money legally becomes the property of the U.S. Treasury. The IRS also noted that refund checks may be held if an individual has not filed tax returns for the subsequent years of 2021 and 2022. Furthermore, any claimed 2020 refund could be applied to outstanding debts, such as unpaid child support or other federal obligations.

The IRS has identified certain groups who are most likely to have unclaimed refunds. These often include students, part-time workers, and other low- to moderate-income individuals who may not have had a filing requirement because their gross income was below the standard threshold. However, they might still be eligible for key tax credits. The EITC, for instance, is designed to assist workers and families with low-to-moderate incomes. For 2020, the credit was worth as much as $6,660 for taxpayers with qualifying children. The agency reminded taxpayers that they could use their 2019 earned income to calculate their EITC for 2020 if that amount was higher than their 2020 earnings, a special rule applicable for that year.

Taxpayers who need to file can access prior-year tax forms, such as the 2020 Form 1040 and 1040-SR, directly from the IRS website. For those missing essential documents like W-2s, 1098s, or 1099s from employers or banks, the first step should be to attempt to retrieve them from the original issuer. If that is not possible, taxpayers can order a free wage and income transcript from the IRS by using the “Get Transcript Online” tool on IRS.gov or by filing Form 4506-T, Request for Transcript of Tax Return.

An analysis of state-by-state estimates reveals where the largest number of potential refunds are concentrated. Texas leads the nation with an estimated 93,400 residents owed a total of nearly $105 million. California follows with 88,200 non-filers and potential refunds totaling over $94 million. Other states with significant unclaimed funds include Florida, with an estimated 57,000 individuals owed $62.6 million, and New York, with 51,300 residents due a collective $58.5 million.

With the deadline just weeks away, the IRS is conducting a final push to inform the public. After May 17, the legal window to claim these specific funds will close permanently. Taxpayers are encouraged to file electronically or ensure their paper returns are postmarked by the deadline to be considered timely.