Time Running Out to Claim 2017 Refund

Hello again, everybody. Tom O’Saben, Enrolled Agent, the Assistant Director of Professional Education and Outreach for the University of Illinois Tax School. I’m a Fall Tax School instructor, author and reviewer of the University of Illinois Federal Tax Workbook, heavily involved in the webinars that we do throughout the year and these weekly blogs. And I’m also a tax practitioner with 31 years of experience and I’m here again today to present you with another weekly blog during the tax season. And specifically, I want to get your attention by saying, are we gonna leave $1.3 billion with the US Treasury? I hope I’ve got your attention and let’s talk about how we can not leave that money with the treasury.

So I’m a huge, huge fan of the Back to the Future franchise. So with all due respect to Huey Lewis and the News, we got to get back in time. And so what are we talking about here? We’re talking about filing those 2017 returns or amending 2017 returns. You remember 2017, don’t you? Let’s see now, it was the spring of 2018. Donald Trump was a relatively new president. TCJA was just recently passed. Can you remember that? COVID. What’s COVID, if we’re in the spring of 2018? Or Zoom. What’s Zoom all about, you say in spring of 2018? And guess what? The number one anticipated movie while we were slugging our way through tax season was, Solo: A Star Wars Story. Now I’m a huge Star Wars fan, but nonetheless, that’s probably not one that will be ever deemed a classic in the Star Wars franchise. Going back again, down memory lane. I’m saying yours truly, I was a Tax School instructor with U of I, but I was with the northern team. I wasn’t with the mothership as I am now, I actually came in in May of 2019. You might also remember the late night of April 14th and 15th. I do. I remember that night well because I went home about eight o’clock on the 14th, got up about 11:30, took shower. My stepdaughter was watching TV and she says, “Are you sleepwalking?” I said no, I’m going back to work. So I worked all night and I noticed about 2-3 o’clock in the morning of April 15th that the IRS wasn’t accepting returns and I thought, oh, this is gonna be terrible. You might remember that the IRS systems crashed and gave people another day to file, but not me. I said, I’m done. By the time I got to the evening of April 15th, I was just a spongy, little grease ball. Anyway, so what did I do then? I took one day off to only to come in the next morning on April the 17th to have someone waiting at the door of my office with a letter from the IRS saying they’re going to be audited. Ah, those were the good old days, weren’t they? So what’s this got to do with gotta go back in time? Do we want to just wax nostalgic about 2017? Not really, stay with me.

The Internal Revenue released Bulletin 2021-75 on April the 5th and I thought, hey, this is really, really pertinent and a good time to think about it, as if you don’t have enough to do. Here’s the URL if you want to go ahead and copy and paste it into your search bar so you can see what we’re talking about. And that’s who has said, the IRS has said, that there’s $1.3 billion laying out there for taxpayers. And why? Because they haven’t filed their 2017 returns, you may find that interesting. So this is an opportunity for all of us and it is for a variety of reasons.

So remember again, in a couple of blogs back, or maybe it was just last week’s blog, they kind of run together. But I would encourage you to go to the University of Illinois Tax School, put it in your search bar and when you get to the University of Illinois Tax School website there’s a bar that you can click that says, read or listen to the weekly blog. My blogs have been kind of building on one another during this tax season. So I would encourage you to go back and take a look at the one where we talked about Revenue Bulletin 2021-67, which I just talked about in last week’s blog. Which says that in addition to April 15th not being the filing deadline for personal returns for 2020, May 17th being the new filing deadline, the bulletin 2021-67 actually tells us that 2017 returns which are about to close will not close until May the 17th. So that would be amended returns or filing those original 2017 returns. So folks, it gives us another month to try to get some of that $1.3 billion that the government estimates is out there.

And according to the bulletin, it’s very interesting, if you want to go ahead and paste that URL and read it. They’re showing actually the breakdown by states. I’m not really certain how the IRS knows what is owed taxpayers, I’m guessing they must be getting this information based on W2 filings or perhaps 1099s where there has been withholding and I guess they’re doing the estimates based on that. Well, I’m here in the state of Illinois, for those of you who know me, I’m very close to St. Louis, Missouri on the Illinois side and so I’m going to mention the statistics for those two states. Illinois, they estimate has 49,000 taxpayers who haven’t filed and they’re owed more than $50 million in refunds and the median potential refund is about $900, a little over $901. So across the river in Missouri, there are 30,500 taxpayers who haven’t filed and they’re owed almost $30 million, again, with a median potential refund of $831. That’s what I’m talking about, are we going to leave the money laying on the table? I think it’s an important concept. I know we’re busy, but this is one deadline that if we don’t deal with it, it’s going to go by the wayside. This $1.3 billion, if it’s not claimed, by May 17th, you know who it belongs to? It belongs to the US Treasury. Of course, we could argue that if it belongs to the US Treasury, it belongs to all of us, but I think you might agree that Treasury has a way of not giving that money back to us.

So most of all, I think what the important thing to consider is when you have a taxpayer who comes in and hasn’t filed, remember again that the statute of limitations for a return that’s not filed is unlimited. They can come back whenever and however long they want to, so I think it’s important to consider filing those returns. I mentioned, I’m a practitioner, just like you are and from time to time, I will have a client who will come in and say, you know what, for whatever reason, I haven’t filed returns in many years. I don’t judge people, but nonetheless, I tell them, I said this very statement, it’s important to remember that the statute of limitations for those returns that aren’t filed is unlimited. So let’s get those returns filed, then we can work on negotiating out some kind of a payment plan if you owe taxes, or in this case, it seems a real shame to lose out on money that you gave the government, your client gave the government, and now you’re going to turn around and let them keep it and you’re not going to get a tax deduction for it as a contribution to a charity, it’s just gonna be gone. So the crux of this really quick blog has been to say, 2017, we got a reprieve for a month. Let’s consider it. Let’s consider the fact that we now also have hindsight, which means we have the ability to look back at 2017 and to say, are there decisions on that return that may be given all of the law changes, that’s why I said, you take that trip down memory lane and you look at TCJA, just being enacted when we were preparing 2017 returns in early 2018. And all of the changes that have come along with the CARES Act and all the COVID relief, are there things we could do to that 2017 return that would have a better impact on these later years? It’ll give you a chance to look at that as well.

After May 17th though, you know what, it’s time to send you back to the future as Doc Brown would say, or at least get back to those 2020 returns that then on May 17th, you’ll be filing extensions. So I wanted this to be a much quicker blog, maybe a little bit more lighthearted than the kind of heavy stuff I’ve been giving you the last few weeks. But again, an opportunity for those clients who maybe are the non filers, sometimes I refer to them as “seven year cicadas,” they only come out of the ground every so often to file a return. We have another month, we have until May 17th to get those returns filed. Again, you have the ability of hindsight to be able to look at 2017 returns, perhaps that were filed, and say boy, I wish we hadn’t for example, taken Section 179 or what the decision might have been back on a 2017 return. Do we want to amend that and if we’re going to amend it, again, May 17th becomes that kind of drop dead deadline. So again, for all of us at the University of Illinois Tax School, this is Tom O’Saben saying we’ll say goodbye for just a while and you know it won’t be a long while.
Hide Video Transcript