Is the IRS Sitting on Your Money? The Overlooked Refunds Most People Miss

October 15th was the final deadline for filing your income tax return. While many people look forward to a refund, millions of Americans unknowingly leave money on the table every year. In fact, the IRS is often holding funds for taxpayers who never claim them.

These unclaimed refunds can happen for several reasons, including not filing a return, making mistakes on the paperwork, or having refund checks returned as undeliverable. With the IRS reporting that billions of dollars in unclaimed refunds sit untouched each year, it is absolutely worth checking whether some of that money belongs to you.

The scope of unclaimed tax refunds

The IRS holds a significant amount of unclaimed tax refunds annually. For 2025 alone, more than $1 billion affecting over 1.1 million people remains unclaimed just because they haven't filed their 2021 claims yet -- yes, 2021.

These unclaimed funds usually come from tax returns that were never filed, even though the taxpayer had money withheld or qualified for refundable credits such as the Earned Income Tax Credit or the Child Tax Credit. For the 2021 tax year, the IRS estimates the average unclaimed refund at about seven hundred eighty one dollars, although the actual amount can vary significantly from person to person.

Many people miss out simply because they did not file a return. Some earned less than the filing requirement and assumed they were not eligible for a refund. Others moved and never updated their address, or they overlooked credits that could have put cash back in their pocket. The IRS only holds unclaimed refunds for a limited window of time, so taxpayers who might be owed money need to act quickly before that opportunity disappears.

What happens to unclaimed refunds?

The IRS holds unclaimed refunds for three years from the original filing deadline for that tax year. For example, a refund from the 2023 tax year must be claimed by April fifteen, twenty twenty seven. After that date, any unclaimed money is moved into the U.S. Treasury’s general fund and becomes property of the federal government. Once that happens, the taxpayer permanently loses the right to recover those funds, no matter how much they were owed.

Another major source of unclaimed money comes from refund checks that never reach their destination. These checks are often returned because a taxpayer moved and did not update their address, or the check was simply lost. While the IRS does attempt to reissue the payment, it cannot do so without current information. If the taxpayer never corrects their address during the three year window, those funds also go unclaimed and eventually disappear into the Treasury.

Does the IRS owe you money?

There are several way to find out if the IRS is holding your refund.

• Check IRS tools. Visit the IRS website and use the “Where’s My Refund?” tool at irs.gov/refunds. You’ll need your Social Security Number or Individual Taxpayer Identification Number, filing status, and the exact refund amount from your return. This tool tracks refunds for the current and prior two tax years, showing whether a refund is pending, issued, or undelivered.

• Review Past Returns. If you didn’t file a return for a recent year, check your pay stubs, W-2s, or 1099s to see if taxes were withheld. Even if your income was below the filing threshold, you might be eligible for refundable credits. For 2024, single filers with incomes under $14,600 (or $29,200 for joint filers) aren’t required to file, but could claim refunds.

• Call the IRS. If online tools don’t clarify your status, contact the IRS at 1-800-829-1040. Be prepared for long wait times, but representatives can verify unclaimed refunds or non-filing status. Have your SSN, filing history, and any relevant documents ready.

• Check for undelivered checks. If you filed, but didn’t receive a refund, it might be undelivered. The IRS sends a CP237A notice if a check wasn’t deposited. Call 1-800-829-0115 to initiate a refund trace for lost or stolen checks.

• Use third-party help. Tax professionals or free Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Eldery (TCE) programs can review prior years’ records to identify unclaimed refunds, especially for complex cases.

How to claim your refund

Once you confirm the IRS owes you money, do the following. First, file a return! Include all income sources, withholdings, and eligible credits. You can e-file through IRS Free File or mail a paper return to the address listed in the Form 1040 instructions.

If you did file a return, but it had errors that reduced your refund, file Form 1040-X (Amended U.S. Individual Income Tax Return) within three years of the original filing date or two years from paying any tax, whichever is later. Explain any changes clearly and attach any supporting documents.

If a refund check was returned, submit Form 8822 (Change of Address) to ensure any reissued checks will reach you, but verify bank details like routing and account numbers for direct deposits.

For checks that went undelivered or were lost, complete Form 3911 (Taxpayer Statement Regarding Refund) if filing jointly, or call 1-800-829-1954 for other statuses. The IRS will cancel the original check and issue a replacement, typically within 30 days.

Last, use “Where’s My Refund?” to track your claim. Processing original returns takes six to eight weeks and any amendments can take up to 16 weeks. If delays persist, contact the IRS or the Taxpayer Advocate Service at 1-877-777-4778.

Claiming refunds for a deceased relative

Heirs may claim a deceased relative’s unclaimed tax refund under specific IRS rules, depending on their relationship and legal authority.

• Surviving spouses. If you filed jointly, claim the refund by noting “DECEASED,” the deceased’s name, and date of death on Form 1040. For joint checks, return with Form 1310 to reissue in your name.

• Executors or court-appointed representatives. File the final Form 1040 with a court certificate proving your role. Form 1310 is needed for amendments, not original filings.

• Other heirs. Non-spouses or non-executors file Form 1310 with Form 1040, checking “other” on Part I, Line C, and answering estate questions. No death certificate is required, but retain it. Refunds go to the estate unless you’re the sole beneficiary.

• Estate income. For estates earning over $600 after death, file Form 1041 and submit Form 56 to confirm your fiduciary role.

• Time limit. The three-year rule applies. For example, 2020 refunds were due by May 17, 2024, for a 2022 death. Check unfiled years quickly.

Refunds are paid to the estate, distributed per the will or state probate laws and will prioritize spouses, children, or heirs if there is no will. Consult with a probate attorney for complex cases to ensure compliance.

Conclusion

Unclaimed tax refunds represent a significant opportunity for taxpayers to recover money due you. Left unclaimed, these refunds revert to the Treasury after three years.

By using IRS tools like “Where’s My Refund?,” filing or amending returns, and updating addresses, you can get your money efficiently if not necessarily quickly.

For deceased relatives, heirs can claim refunds by filing Form 1040 with Form 1310, provided they act within the deadline and establish their role. Whether for yourself or a loved one, diligence in navigating the labyrinth of IRS procedures ensures you don’t leave money on the table and just might give you much-needed financial relief.

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