If about 20,300 Missourians fail to file an amended tax return in the next 45 days they may not receive their share of an estimated $18.5 million waiting for them at the Internal Revenue Service.
Michael Devine, Missouri IRS spokesman, said the refunds of $600 or more are available to more than 20,000 Missourians who had income but failed to file a tax return because they earned below the amount where a return is required to be filed.
Devine said many of them didn't realize that a law had passed that makes refunds available to low and moderate income taxpayers beyond the amount of taxes due even though that amount was not withheld from their paychecks.
Last year, Devine said, 3,600 Callaway County residents received $7.6 million from the federal government by claiming the Earned Income Tax Credit (EITC), a special tax benefit for low and moderate income workers.
Devine said in cases where a 2007 return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. That window for 2007 returns closes on April 18, 2011. If no return is filed to claim a refund, the money becomes the property of the U.S. Treasury. Devine said there is no penalty for filing a late return if the person filing qualifies for a refund.
Devine said when the economy is in a decline it is especially important for many people who need the money to make a claim. He said low income taxpayers can lose more than a refund of taxes withheld. Low and moderate income workers may not have claimed the EITC even though they were eligible for it. In 2007 the EITC could have been worth as much as $4,716 for someone with two or more qualifying children, he said.
Devine said taxpayers seeking a 2007 refund that their checks will be held if they have not filed returns for 2008 and 2009. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to offset unpaid child support or past due federal debts, such as student loans.
Nationwide, Devine said refunds totaling more than $1.1 billion may be waiting for nearly 1.1 million people who did not file a federal income tax return in 2007. The IRS estimates that half of these potential 2007 refunds are $640 or more.
Current and prior year tax forms and instructions are available on the Forms and Publications page of irs.gov website or by calling toll-free at 800-829-3676.
Taxpayers who are missing their tax statements (W-2, 1098, 1099 or 5498) from 2007, 2008 or 2009 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering online at www.irs.gov, calling 800-908-9946 or by filing Form 4506-T, a Request for Transcript of Tax Return, with the Internal Revenue Service.
A tax credit is far more valuable than a tax deduction. Someone in the 10 percent income tax bracket can offset only 10 percent of his income through a deduction. But a tax credit will offset dollar for dollar the taxes due. The EITC credit may also actually pay the individual more than his tax bill.
Although benefits are higher for families, the EITC may also be available to individuals with no dependents.
"The EITC can put an extra $457 to $5,666 into the pockets of low income working individuals and families," Devine said.
"If they qualify for the credit," Devine said, "they could pay less federal tax or even receive a refund beyond the amount of taxes withheld."
The tax credit is available only to people who have a job and are working but earn less than $49,000 a year.
The EITC was created in 1975 to help offset the cost of Social Security taxes and to serve as a work incentive. The policy of providing a refund larger than the amount withheld for taxes also is designed to persuade people to continue working rather than stopping work and going on welfare.
Since that tax credit started, Devine said more than 522,000 Missourians and families have claimed the tax credit and received more than $1.1 billion from the federal government.
Devine said an IRS analysis of census data indicates that four of five taxpayers who are eligible for the credit take the EITC money.
But some people are still not aware of the benefit that can not only wipe out a tax bill but provide extra money to low and moderate income workers.