Does the Federal Government Owe Me Money?

When money is needed for an emergency, one of the first things that we do is run through our mental checklist of friends, family, and vendors who owe us money. One name that never seems to be on the "who owes me money" list is the Internal Revenue Service (IRS).

Around a billion dollars of IRS refund money is unclaimed every year, which is an amazing amount of money to forget about. There are two reasons why this happens; we will talk about them both.

Reason #1: Never filed. One big mistake that many taxpayers make is not filing in the first place. Even if you made under the reporting threshold or had so little income that negligible federal taxes were withheld, the IRS could still owe you money.

My two adult children (both full time college students with part time jobs) almost missed out on claiming the $400 "Working for Pay" last year. Neither of them had more than $40 or so in federal withholding and felt that filing a return would be a waste of time. You can imagine their surprise when those $400 checks arrived in the mail. Without filing, they would have never received those credits.

There are a handful of tax credits out there that many DIY tax filers are not aware of. These include:

- Working for Pay tax credit ($800 for a joint return, $400 for others)
- Earned Income Credit
- Additional Child Care credit
- Refundable American Opportunity Credit (for college students)
- Plus other credits (read the entire list here)

So there it is. Even if you are not required to file because of a low income, it is still a smart strategy. For low income families, filing is the only way you will be refunded the federal taxes withheld from your paycheck this year AND benefit from eligible tax credits.

Reason #2: Never received a refund check. Aside from not filing, a second reason why the IRS could owe you money is because the refund check never arrived. If you wrote down the wrong return address or moved, the refund check may have been undeliverable. The IRS sends refund checks to the last known address of the tax payer; if the information is wrong or no forwarding address was left with the post office the refund check is returned to the IRS.

If you were expecting a refund in the past 12 months and did not receive it, visit you can update your mailing information directly on the IRS website. Visit IRS.gov and click on the "Where's My Refund" link. Another option is to download Form 8822 Change of Address from the website and mail in the correct address or calling 1-800-829-1040. The IRS will hang onto that unclaimed money for up to three years, and then it gets absorbed in a general fund. If you think the government owes you money, move quickly before it's gone for good.

Sources:
http://www.irs.gov/newsroom/article/0,,id=211635,00.html