Does The IRS Have Your Money? There’s More Than $1 Billion In Unclaimed Refunds For Tax Year 2021

The IRS May Have Your Money: Unclaimed Tax Refunds from 2021

The IRS is holding onto more than $1 billion in unclaimed tax refunds from the 2021 tax year, and over 1.1 million taxpayers might be eligible to claim this money. If you haven’t filed your 2021 federal income tax return, you could be one of them. The IRS estimates that these unclaimed refunds are waiting for taxpayers who, for various reasons, did not file a tax return for that year. If you’re due a refund, it’s important to act quickly because the window to claim it is closing soon.

Understanding the Tax Refund Deadline

Normally, taxpayers have three years from the filing deadline to claim their refund. For the 2021 tax year, this means you must file your return by April 15, 2025, to receive any owed money. If you miss this deadline, the money will go back to the U.S. Treasury, and you’ll lose your chance to claim it. This rule applies to all refunds, including those related to the Recovery Rebate Credit (RRC) and other tax credits. However, there are some exceptions and special considerations you should be aware of, especially for the 2021 tax year.

An Important Exception: The Recovery Rebate Credit

In December 2023, the IRS announced that over one million taxpayers might have missed out on the Recovery Rebate Credit (RRC) for the 2021 tax year. The RRC was a relief measure tied to stimulus payments issued during the COVID-19 pandemic. If you were eligible for the credit but didn’t claim it on your 2021 tax return—or if you left the RRC field blank or entered $0—the IRS is stepping in to help. They identified eligible taxpayers who filed a return but didn’t claim the RRC and automatically issued payments to them. These payments, with a maximum of $1,400 per individual, were distributed in December 2024 and should have arrived by late January 2025. However, if you were eligible for other tax credits or adjustments, you’ll still need to file a tax return to claim them.

Why You Might Still Need to File Your 2021 Tax Return

Even if you received the automatic RRC payment, you may still need to file your 2021 tax return to claim other tax credits or adjustments. For example, the Earned Income Tax Credit (EITC) is a refundable credit for low- to moderate-income workers, and for the 2021 tax year, it could have been worth up to $6,728 for taxpayers with qualifying children. Other reasons you might be owed a refund include overpayment of taxes through withholding or quarterly payments, even if your income was below the threshold requiring you to file a tax return. Remember, you can’t receive the benefits of refundable credits or other tax breaks unless you file a return. And there’s no penalty for filing late if you’re due a refund.

The Numbers: Who’s Missing Out and Where

The IRS estimates that more than $1 billion in unclaimed refunds remains from the 2021 tax year, with a median refund amount of $781. This figure doesn’t include additional amounts from the RRC or other credits. Taxpayers in certain states are more likely to have larger potential refunds, with New York, Pennsylvania, Rhode Island, Massachusetts, and Illinois leading the list. On the other hand, California, Idaho, New Jersey, Minnesota, and Montana have the lowest median potential refunds. Notably, the most populated states, like California and Texas, have the highest number of taxpayers who may be owed money, with over 100,000 each potentially missing out on a refund. Even smaller states, such as Wyoming and Vermont, have thousands of taxpayers who may be eligible for refunds.

What You Need to Do to Claim Your Refund

If you haven’t filed your 2021 tax return yet, it’s time to take action. First, gather the necessary documents, such as your W-2, 1098, 1099, or 5498 forms from 2021. If you don’t have these forms, you can request copies from your employer, bank, or other payer. You can also access your tax records and transcripts directly from the IRS website by logging into your Individual Online Account. If you prefer to file on paper, visit the IRS Forms and Publications page for prior-year forms or call 800.TAX.FORM (800.829.3676) to request them. If you’re using tax filing software, check for a “prior years” option to easily locate your 2021 return. Remember, filing electronically is faster and more secure than mailing a paper return. Don’t wait—file your 2021 tax return by April 15, 2025, to ensure you don’t lose your refund.

Conclusion: Don’t Miss Out on Your Money

The IRS is holding onto over $1 billion in unclaimed refunds from the 2021 tax year, and the deadline to claim your share is fast approaching. If you haven’t filed your 2021 tax return, now is the time to act. Even if you received an automatic RRC payment, you may still be eligible for other credits or adjustments. Don’t let your money go back to the Treasury—file your return by April 15, 2025, and ensure you receive the refund you’re owed. Whether you’re claiming the EITC, recovering overpaid taxes, or simply ensuring you don’t miss out on stimulus-related credits, filing your 2021 tax return is a step worth taking.