The Internal Revenue Service today reminded the 1 million people who didn’t file their tax year 2020 returns they may be eligible for a refund if they file by the May 17 deadline.

The IRS estimates more than $1 billion in refunds remain unclaimed because people haven’t filed their 2020 tax returns yet. The state-by-state table below shows how many people are potentially eligible for these refunds, and the average median refund in each state.

There’s no penalty for failure to file if a refund is due. However, a return claiming a refund must be filed within three years of its due date for a refund to be allowed. After the expiration of the three-year period, the refund statute generally prevents the issuance of a refund check and the application of any credits, including overpayments of estimated taxes or withholding amounts, to other tax years that are underpaid.

For 2020 tax returns, people have a little more time than usual to file their claim for refunds. Typically, the filing deadline to claim old refunds falls around the tax deadline of April 15. However, the 2020 filing deadline was pushed to May 17, due to COVID-19, making the three-year window deadline for 2020 unfiled returns May 17, 2024. The IRS issued Notice 2023-21 on Feb. 27, 2023, providing legal guidance on claims required by the postponed deadline.

Many people who didn’t file may be eligible for more

By missing out on filing a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2020. The estimate does not include credits that non-filers may be eligible to receive. Credits include the Earned Income Tax Credit (EITC), the Recovery Rebate Credit or other credits that may be applicable.

Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2020, the EITC was worth as much as $6,660 for taxpayers with qualifying children. The EITC helps individuals and families whose incomes are below certain thresholds.

The IRS has previously reminded those who may be entitled to the COVID-era Recovery Rebate Credit in 2020 that time is running out to file a tax return and claim their money. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments, also known as stimulus payments, distributed in 2020 and 2021.

Plan to file? IRS offers options to get key documents

Gathering all the necessary documents and forms to file a return for 2020 may take some time. People should start as soon as possible to make sure they have enough time to file before the May 17 deadline for 2020 refunds. Here are some options:

• Request copies of key documents. Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2020, 2021 or 2022 can request copies from their employer, bank or other payers.
• Use Get Transcript Online at IRS.gov. Taxpayers who have lost contact with their employer or other payers can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. For many taxpayers, this is by far the quickest and easiest option.
• Request a transcript. Another option is for people to file Form 4506-T, Request for Transcript of Tax Return, with the IRS to request a “wage and income transcript.” A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return. But plan ahead – these written requests can take several weeks; people are strongly urged to try the other options first.
• Current and prior years’ tax forms. Tax year 2020 Forms 1040 and 1040-SR and instructions are available on the IRS.gov Forms, instructions & publications page or by calling toll-free 800-TAX-FORM (800-829-3676).

Taxpayers who are unsure if they are required to file a return can visit Do I need to file a tax return? or refer to Publication 17, Your Federal Income Tax (For Individuals).

Free help is available

For individuals who have not filed a federal income a tax return for 2020, the IRS offers tools and resources on IRS.gov. Free support includes the Interactive Tax Assistant (ITA), information on What to do if you haven’t filed your return, and Frequently asked questions and answers (FAQs).

Qualified taxpayers can also access free tax preparation assistance through the Volunteer Income Tax Assistance and the Tax Counseling for the Elderly programs. Use the VITA Locator Tool or call 800-906-9887 to locate the nearest VITA site.

The IRS also reassures taxpayers there is no penalty for claiming a refund on a late-filed tax return. Direct deposit is recommended as the quickest and simplest way to receive a tax refund.

State-by-state estimates of individuals who may be due 2020 income tax refunds

The IRS estimated the number of individuals in each state and the median potential refund a filer may be entitled to receive. The actual refund amount will vary based on a household’s tax situation.

* Excluding credits.

Source: IRS-2024-133, May 6, 2024

The Internal Revenue Service encouraged thousands of tax-exempt organizations today to file their taxes ahead of their filing deadline.

The annual filing due date for certain returns filed by tax-exempt organizations is normally by the 15th day of the 5th month after the end of an organization’s accounting period. Those operating on a calendar year (CY) basis must file a return by May 15. Returns due include:

• Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF).
• Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ.
• Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts).
• Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.

Mandatory electronic filing

Electronic filing provides fast acknowledgement that the IRS has received the return and reduces processing time, making compliance with reporting requirements easier. Note:

• Organizations filing a Form 990, 990-EZ, 990-PF or 990-T for CY 2023 must file their returns electronically.
• Private foundations filing a Form 4720 for CY 2023 must file the form electronically.
• Charities and other tax-exempt organizations can file these forms electronically through an IRS authorized e-file provider.
• Organizations eligible to submit a Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard)on IRS.gov.

Common errors

IRS encourages organizations to review their forms for accuracy and to submit complete returns. If an organization’s return is incomplete or the wrong return for the organization, the return will be rejected. Common errors include missing or incomplete schedules.

Extension of time to file

Tax-exempt organizations may request a six-month automatic extension by filing a Form 8868, Application for Extension of Time to File an Exempt Organization Return. In situations where tax is due, extending the time for filing a return does not extend the time for paying tax.

Pre-recorded workshops

IRS provides a series of pre-recorded online workshops to help exempt organizations comply with their filing requirements. These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax-exempt status, including filing annual information returns.

It’s easy to stay up to date on tax information year-round with the IRS verified social media accounts and e-news services. Taxpayers can get tips, guidance and the latest tax law news delivered to their social feed or inbox.

Source: IRS-2024-135, May 6, 2024

The Department of Treasury and the Internal Revenue Service today issued Notice 2024-36PDF for owners of clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects and critical material projects.

On Feb. 13, 2023, the Department of Treasury and the IRS issued Notice 2023-18 to establish the program and announce an initial allocation round of credits. On May 31, 2023, the Department of Treasury and the IRS issued Notice 2023-44 to provide additional guidance for the program. Approximately $4 billion in credits were allocated in the first allocation round.

Today’s notice announces the second round of credit allocations for the program to allocate the remaining $6 billion credits. The notice also modifies appendices A, B and C of Notice 2023-44.

Like in the prior allocation round, the Department of Treasury and the IRS are partnering with the Department of Energy (DOE) to recommend projects. The DOE section 48C portal will open no later than May 28, 2024, for taxpayers to submit a concept paper and begin the process of seeking a section 48C credit allocation.

More information about IRA guidance may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

Source: IRS-2024, April 29, 2024

The Department of Treasury and Internal Revenue Service issued final regulations today describing rules and definitions for the transfer of eligible credits in a taxable year, including specific rules for partnerships and S corporations.

The Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors act (CHIPs) enable taxpayers to take advantage of certain manufacturing investment, clean energy investment and production tax credits through elective pay or transfer provisions.

For tax years beginning after Dec. 31, 2022, eligible taxpayers can choose to transfer all or a portion of eligible credits to unrelated taxpayers for cash payments.

The unrelated taxpayers are then allowed to claim the transferred credits on their tax returns. The cash payments are not included in gross income of the eligible taxpayers and are not deductible by the unrelated taxpayers.

The final regulations also describe special rules related to excessive credit transfers and recapture events, including rules for determining whether an event has occurred, the resulting tax impact and the person responsible for that tax impact.

The final regulations also provide rules for a mandatory IRS pre-filing registration process through an electronic portal. The pre-filing registration process must be completed, and a registration number received, prior to making an election to transfer eligible credits.

In addition, the final regulations describe specific rules for partnerships and S corporations as eligible taxpayers and transferee taxpayers.

Previously, the IRS issued proposed regulations for the transfer of applicable credits and temporary regulations for the mandatory IRS pre-filing registration process.

For detailed instructions on how to use the tool, refer to Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 Pre-Filing Registration ToolPDF.

Source: IRS-2024-120, April 25, 2024

Here is what you need to know about filing your income tax return this year.

When is the deadline?
For most taxpayers, the deadline to file their federal tax return, pay any tax owed or request an extension to file is Monday.

Taxpayers living in Maine or Massachusetts have until April 17, 2024, due to the Patriot’s Day and Emancipation Day holidays. If a taxpayer lives in a federally declared disaster area, they also may have additional time to file.
Most states use the federal Tax Day deadline as the deadline to file state taxes, but not every state does. Click here to make sure of the deadline for your state.

What happens if I don’t file on the 15th?
If you don’t file your income tax return, and you owe the government money, you will face fines and penalties in addition to the taxes you owe.

Can I get an extension on filing my return?
You can file for an extension, but filing for an extension does not mean you do not have to pay any taxes you owe. It simply means you have more time to file the return.
If you owe taxes, you are required to pay the bill by April 15.

What kind of penalties do I face if I don’t file my return by Tuesday?
If you owe taxes and do not pay by April 15, penalties immediately take effect. The two penalties you will face are penalties for failure to file a return and failure to pay your tax bill. The penalties can be hefty.

According to the IRS:

• The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty won’t exceed 25% of your unpaid taxes.
• If you still haven’t paid after five months, the Failure to File Penalty will max out, but the Failure to Pay Penalty continues until the tax is paid, up to its maximum of 25% of the unpaid tax as of the due date.
• If your return was over 60 days late, the minimum Failure to File Penalty is $435 (for tax returns required to be filed in 2020, 2021 and 2022) or 100% of the tax required to be shown on the return, whichever is less.

How do I file my taxes?
Electronic filing is the way most people file their taxes. It is easier for the IRS to process the return and issue a refund or collect taxes owed.
If you file electronically and include direct deposit information, you should get your refund within 21 days.
If you file a paper return, it will take longer since the returns will have to be processed by hand.

Will I have to pay to file a return?
The IRS uses a service known as Free File if your adjusted gross income is $73,000 or lower.
If your income is above $73,000, then you will have to pay a tax preparation company to file electronically.

What if you can’t pay the amount of tax owed?
There are payment plans available to people who do not have the money to pay their tax bills by April 15.
However, under those plans, penalties will still be charged.

Should you skip filing if you cannot pay the tax you owe?
No, you should not skip filing. If you skip filing, you will have to pay a penalty for failing to file in addition to failing to pay the tax owed.

The Department of Treasury and the Internal Revenue Service today issued Announcement 2024-19PDF that addresses the federal income tax treatment of amounts paid for the purchase of energy efficient property and improvements.

Generally, taxpayers who receive rebates for the purchase of energy efficient homes will not include the value of those rebates as income on their tax returns, however they will need to reduce the basis of the property when they sell it by the amount of the rebate.

The Inflation Reduction Act (IRA) statutory language describes performance-based incentives and electrification product subsidies as “rebates.”

Announcement 2024-19 provides that amounts received from the Department of Energy (DOE) home energy rebate programs funded through the IRA will be treated as a reduction in the purchase price or cost of property for eligible upgrades and projects. Accordingly, the consumer that receives an IRA rebate will not be required to report the value of the rebate as income.

Additional information about energy-related tax benefits under the Inflation Reduction Act, such as energy efficient homes, can be found on IRS.gov.

Source: IR-2024-97, April, 2024