IRS Sets Deadline For $1 Billion Unclaimed Refunds

By: Tina Hodges
03/10/2010 08:15 PM ET

The IRS billion unclaimed funds total $1.3 billion in refunds from 2006. More than 1.4 million tax payers didn’t file a return. If you are one of those individuals, there are no penalties to pay if you have a refund.

The best thing to do is file your taxes by using a 2006 Form 1040. Yes, sometimes good things can happen. The average refund is approximately $800.

The refunds are owed in every state, as well as residents of U.S. territories and military personnel who didn’t file returns in 2006. California is home to the most taxpayers, almost 160,000, who didn’t send in returns. It accounts for $151 million of the total.

In addition to the regular refund amount, a 2006 return will get most taxpayers at least $30 and possibly up to $60 in extra cash back from the government. This money is courtesy of the repealed Telephone Excise Tax Refund. It was paid out based on the number of exemptions taxpayers claimed on their 2006 returns.

What happens to the money if nobody claims it?

The bad news is, if you are one of those individuals to get a refund, you must file by April 15, 2010. After that, the Internal Revenue Service will keep the money forever, because there’s only a three-year window of opportunity from the original filing deadline.

Internal Revenue Service

The Internal Revenue Service, also known as the IRS, is the United States federal government agency that collects taxes and enforces the internal revenue laws. It is an agency within the U.S. Department of the Treasury and is responsible for interpretation and application of the tax law. The history on how the IRS was created is an interesting story.

The Supreme Court declared the Income Tax of 1894 was unconstitutional. This was during a 30-year post-civil-war depression. This left the US federal government scrambling to raise money.

Sixteenth Amendment

In 1906, with the election of President Theodore Roosevelt, and his successor President William Taft, the US saw a new movement for tax reform. This movement culminated in February 1913 with the ratification of the Sixteenth Amendment to the United States Constitution. “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

42 States Ratified Constitution

This granted Congress the specific power to create a direct income tax on US citizens. By March 1913, 42 states had ratified the change to the Constitution. Connecticut, Rhode Island, and Utah rejected the amendment; Pennsylvania, Virginia, and Florida didn’t take up the issue.

From the 1950s through the 1970s, the IRS began using cutting-edge technology such as microfilm to keep and organize records. Easy access to this information proved controversial, when President Richard Nixon’s tax returns were leaked to the public. His tax advisor became the fourth law-enforcement official to be charged with a crime during Watergate.

President Richard Nixon’s Tax Returns

John Requard Jr., accused of leaking the documents, collected delinquent taxes in the slums of Washington. In his words, “We went after people for nickels and dimes, many of them poor and in many cases illiterate people who didn’t know how to deal with a government agency.” Nixon, with a salary of $200,000, paid only $792.81 in federal income tax in 1970 and $878.03 in 1971, with deductions of $571,000 for donating “vice presidential papers.”

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