Didn't file for 2021? The IRS may owe you money. April 15 is your last chance to claim it
Didn't file for 2021? The IRS may owe you money. April 15 is your last chance to claim it
Show Caption
Hide Caption
Tax status changing? Here's what to know about filing this year
Tax season gives many people anxiety. Here's what we know about filing this year.
With the clock ticking on tax season, the IRS is reminding Americans that April 15 is also their last chance to file a past due return and receive a refund for tax year 2021.
Some 1.1 million Americans who didn't file a federal income tax return for 2021 are collectively missing out on $1.025 billion in unclaimed refunds, according to the IRS. If you are one of them, you may be leaving money on the table and time is running out to claim it.
The IRS says there is no penalty for failing to file until now if a refund is due, but in order to receive one and claim any credits, a past due return must be filed within three years of the original due date. For those who didn't file in 2022, that deadline is April 15, 2025.
Fail to file within the three-year window? Your refund becomes the property of the U.S. Treasury and you're most likely not getting it back.
More: Kids bring joy, chaos... and tax benefits. What to know as a new parent filing a return
How much does the IRS owe taxpayers?
The more than $1 billion estimate for unclaimed refunds is based on taxes that were withheld from paychecks or paid during 2021.
States with the highest median refund for 2021 include Massachusetts at $936; Rhode Island at $946; Pennsylvania at $993; and New York, where the IRS estimated the median unclaimed refund is $995.
The IRS estimates the midpoint for potential refunds nationwide for 2021 is $781, meaning half the refunds are more than $781 and half are less. Everyone's circumstances are different. Actual refund amounts will vary based on a filer's status, withholding amount, and other factors.
Why some refunds could be more or less
Tax year 2021 refunds may be held back if you haven't filed returns for 2022 and 2023, so make sure you've filed for all three years. They may also be withheld and used to offset unpaid child support or past due federal debts, including student loans.
Taxpayers can potentially up their 2021 refund by thousands of dollars if they are eligible for and take advantage of credits, such as the recovery rebate credit and the earned income tax credit, when they file. But remember, that money goes to the U.S. Treasury unless you file by April 15.
Contributing: Susan Tompor
Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
2 hours ago
- Yahoo
Want to delay RMDs? Check out qualified longevity annuity contracts
Once you hit age 73, IRS rules say you must start taking required minimum distributions (RMDs) from your traditional retirement accounts — even if you don't need the cash and would rather let it grow. These forced withdrawals can trigger unwanted taxes and potentially even bump you into a higher tax bracket. But if you're looking for a legal way to delay some of those RMD headaches, a qualified longevity annuity contract, or QLAC, is one way to do it. Think of a qualified longevity annuity as a way to buy time before RMDs begin with your retirement money — while earmarking guaranteed income for later in life. QLACs were born out of a rule change from the U.S. Treasury. In 2014, they issued regulations allowing specific types of deferred income annuities — QLACs — to be held inside qualified retirement accounts, such as IRAs and 401(k)s. A QLAC is a deferred income annuity you buy with retirement savings and payouts from the insurer begin between age 75 and 85. It's essentially longevity insurance, designed to provide steady income when you're older and more likely to need it. Once you fund a QLAC, those dollars are removed from your retirement plan balance for RMD purposes. That means you can delay taking distributions on that portion of your savings until the annuity starts paying out, no later than age 85. QLACs come with some strict rules you should be aware of when considering one. Funding limits: You can allocate up to $210,000 to a QLAC in 2025, and this figure is generally increased each year for inflation. Payout timeline: Payments must start no later than age 85. You can choose to begin receiving income earlier, but you can't defer past that point. Only income or fixed annuities: Under the law, a QLAC cannot be a variable annuity or fixed index annuity, both of which are considered more complex and riskier options for consumers. Irrevocability: Once you buy a QLAC, you can't access the principal again. It's illiquid and doesn't have a cash surrender value. Death benefit rules: Most QLACs offer a 'return of premium' death benefit instead, which means any unused portion of your original investment is paid out to beneficiaries if you pass away before receiving it all. However, this feature usually reduces your monthly payout. An alternative option is life-only payouts with no refund, giving you higher income while you're alive, but no payout to heirs if you die early. The size of your QLAC payments depends on how much you put into the contract and how many years the money has to grow before payouts begin. The longer you wait to start receiving income — up to age 85 — the larger those payments will typically be. Get matched: Find a financial advisor who can help you maximize your investments When you purchase a qualified longevity annuity contract with money from a traditional IRA or other eligible retirement plan, the amount you invest is excluded from RMD calculations. You don't have to take withdrawals from those dollars starting at age 73 because, under the revised IRS definition, the QLAC itself satisfies the RMD rules. Even though the income payments from a QLAC can be deferred as late as age 85, they are still considered compliant under RMD regulations. That's a big win if you're trying to delay taxable income and avoid unnecessary withdrawals. Because the total balance of your IRA or other qualified account is reduced by the amount you put in your QLAC, RMDs on your other retirement accounts will be smaller, and your taxable income will likely be lower. That can work in your favor, potentially keeping you in a lower tax bracket during retirement. You can buy a QLAC through a direct, tax-free transfer from your retirement account, and it's not counted as a taxable distribution. However while the annuity's investment growth is tax-deferred — just like the retirement account it came from — you will owe income tax eventually once payouts begin. Because you're not required to invest the full $210,000 QLAC cap all at once, you can get creative with how you structure your income. For example, you might buy one QLAC at age 70 with an income start date of 80, then purchase another at age 72 that begins paying out at 85. This staggered approach can help you fine-tune your cash flow in retirement while maintaining flexibility with the rest of your portfolio. Ultimately, QLACs don't eliminate RMDs — but they can carve out a chunk of your retirement savings and delay when Uncle Sam gets his cut. As appealing as QLACs might sound, they're not a perfect fit for everyone. Loss of control: One of the biggest trade-offs is the loss of control over your money. Once you purchase a QLAC, the funds are locked up. You can't tap that money in an emergency or reallocate it to other investments later. The annuity becomes an irrevocable contract with an insurance company, and there's no liquidity. Life expectancy: Another risk is longevity itself. If you don't live long enough to reach the annuity's start date — or only live a few years beyond it — you may get little or nothing out of the contract. No additional tax break: Some critics also argue that QLACs don't offer any new tax advantages. Retirement accounts like IRAs and 401(k)s already offer tax-deferred growth. A QLAC doesn't change that — it only punts a portion of the tax bill further down the road. Other tax strategies: If your goal is to manage your future tax bills, other strategies like Roth conversions or charitable distributions might offer more flexibility without tying up funds for years or even decades. Finally, QLACs simply don't make sense for everyone. If you're in poor health, have a shorter life expectancy, or want to spend your money more freely in the early years of retirement, deferring income until 85 may not align with your goals. QLACs are built for people playing the long game. If that's not you, your money is probably better utilized elsewhere. If you're in your 60s and want to delay RMDs, a QLAC is one way to do that. It defers taxes and provides a stream of guaranteed payments later in life — all while playing by the IRS rule book. QLACs aren't for everyone, but they're one of the few tools that let you legally delay your RMDs. Just be sure you're comfortable locking up the money — and you're prepared for the tax bill once RMDs finally begin. Learn more: Planning to retire in 10 years? Do these 6 things first Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Sign in to access your portfolio
Yahoo
3 hours ago
- Yahoo
Inherited IRA rules: 7 things all beneficiaries must know
Inheriting an IRA can be complex. The rules differ based on your relationship to the deceased, your age and even their age at death. One misstep can trigger hefty penalties or tax bills you can't undo. Surviving spouses can treat the IRA as their own or remain as the beneficiary, which opens up more options for delaying distributions and maximizing growth. Most inheritors (especially non-spouses) must empty the account within 10 years, potentially triggering big tax hits if not planned for properly. An inherited IRA is an individual retirement account opened when you inherit a tax-advantaged retirement plan (including an IRA or a retirement-sponsored plan such as a 401(k)) following the death of the owner. Any type of IRA may be turned into an inherited IRA, including traditional and Roth IRAs, SEP IRAs and SIMPLE IRAs. It may be one of the most complex issues to handle well when wrapping up an estate. If you've recently inherited an individual retirement account, you could find yourself at the tricky three-way intersection of estate planning, financial planning and tax planning. One wrong decision can lead to expensive consequences, and good luck trying to persuade the IRS to give you a do-over. Looking for an advisor?: Find a financial advisor near you or online When it comes to inheriting an IRA, an heir will typically have to move assets from the original owner's account to a newly opened IRA in the heir's name. For this reason, an inherited IRA may also be called a beneficiary IRA. Importantly, the income tax treatment of the IRA remains the same from the original account to the inherited IRA. So, accounts made with pre-tax dollars (as in a traditional IRA) or after-tax dollars (as in a Roth IRA) are still treated the same way in an inherited IRA. Anyone can inherit an IRA, but the rules on how you must treat it differ depending on whether you're the spouse or someone else. Spouses get the most flexibility when inheriting an IRA. You can treat the account as your own or keep it as an inherited IRA, depending on what best fits your financial and tax situation. If the original account owner died before taking required minimum distributions (RMDs): Roll the IRA into your own IRA. Treated as your own IRA. RMDs not required until you reach age 73. Remain a beneficiary of the inherited IRA. Can delay RMDs until the deceased would have turned 73. Take a lump-sum distribution. Fully taxable if a traditional IRA. If the original account owner died on or after starting RMDs: You must take the deceased owner's RMD for the year of death if it wasn't already taken. You can then become the owner. You then begin RMDs at age 73 and they're calculated using your own life expectancy. Or you can remain a beneficiary of the inherited IRA. You must begin taking RMDs in the year after the year of your spouse's death. Non-spouse have fewer choices and the SECURE Act shook up long-standing practices, creating even more confusion. You can't treat the account as your own, and the 10-year rule usually applies. If the original account owner died before taking RMDs: Eligible designated beneficiaries (you're chronically ill or disabled, a minor child, or not more than 10 years younger than the original owner) can choose to stretch RMDs over their life expectancy instead of the deceased's expectancy. Designated beneficiaries (everyone else) must follow the 10-year rule. Entire balance must be withdrawn by Dec. 31 of the 10th year after death. If the original account owner died on or after taking RMDs: You must take the deceased owner's RMD for the year of death if it wasn't already taken. After that: Designated beneficiaries 10-year rule applies Eligible designated beneficiaries You must continue taking RMDs. Distributions are based on your life expectancy or the owner's life expectancy, whichever is longer. Non-individuals — like estates, charities or some trusts — have the least flexibility. If the beneficiary isn't a 'qualified see-through trust,' IRS rules accelerate distribution. If the original account owner died before taking RMDs: Five-year rule applies. Entire account must be distributed within five years. If the original account owner died on or after taking RMDs: Five-year rule applies. If someone inherits an IRA from their deceased spouse, the survivor has a few choices of what to do with it: Treat the IRA as if it were your own, naming yourself as the owner. You can also roll it over into another account, such as another IRA or a qualified employer plan, including 403(b) plans. Treat yourself as the beneficiary of the plan. If you're a surviving spouse, you can roll over the inherited IRA into your own account, but no one else will receive this privilege. You have other options for taking the money as well, and each course of action may create additional choices that you must make. In addition, your options depend on whether the deceased spouse was under or at least age 73. For example, if you, as a surviving spouse, are the sole beneficiary and treat the IRA as your own, you may have to take RMDs, depending on your age, or you may have to fully withdraw the money in 10 years. But in the right circumstances, you may have the option of not withdrawing money. If you were not interested in taking money out at this time, you could let that money continue to grow in the IRA until you reach the age when you must take RMDs, says Frank St. Onge, an enrolled agent at Total Financial Planning, LLC in the Detroit area. In addition, spouses 'are able to roll the IRA into an account for themselves. That resets everything. Now they are able to name their own beneficiary that will succeed them and be able to deal with the IRA as if it is their own,' says Carol Tully, CPA and attorney at Wolf & Co. in Boston. The IRS provides further rules around your options, including what you can do with a Roth IRA, where the rules differ substantially from traditional IRAs. If you've inherited an IRA, you'll need to take action to avoid running afoul of IRS rules. Your available options as an inheritor depend on whether you're: An eligible designated beneficiary: Meaning you're chronically ill or disabled, a minor child or not more than 10 years younger than the original owner. A designated beneficiary: If you're not a spouse or someone in one of the categories above, you're known as a designated beneficiary. If you're in the first group, you have two options: You can transfer assets into an inherited IRA in your name and choose to take RMDs over your life expectancy or that of the deceased account holder's. You can transfer assets into an inherited IRA in your name and choose to take distributions over 10 years. You must liquidate the account by Dec. 31 of the year that is 10 years after the original owner's death. Your ability to access these options depends on whether the original owner of the IRA was under or at least age 73. The first option allows most of your funds to grow for potentially decades while you take minimal amounts out each year. In the second option, the beneficiary is forced to take all the money over 10 years. For substantial accounts, that can add up to a monstrous income tax bill — unless the IRA is a Roth, in which case, taxes were paid before money went into the account. If you're in the second group — designated beneficiaries group — you can select only the 10-year rule as outlined above. You'll have up until Dec. 31 of the year that is 10 years after the original account owner's death to fully withdraw the account. When you're considering how to take withdrawals, you'll need to follow the legal requirements while balancing the tax impact of withdrawals and the advantages of letting the money continue to grow over time. The IRS website has more information on the topic of RMDs. Learn more: When to get a financial advisor Another hurdle for beneficiaries of traditional IRAs is figuring out if the benefactor had taken his or her RMD in the year of death. If the original account owner hasn't done this, it's the responsibility of the beneficiary to make sure the minimum has been met, says Natalie Choate, a retired estate planning lawyer and author of the book 'Life and Death Planning for Retirement Benefits.' 'Let's say your father dies Jan. 24, leaving you his IRA. He probably hadn't gotten around to taking out his distribution yet. The beneficiary has to take it out if the original owner didn't. If you don't know about that or forget to do it, you're liable for a penalty of 50 percent' of the amount not distributed, Choate says. Not surprisingly, that can cause a problem if someone dies late in the year. The last day of the calendar year is the deadline for taking that year's RMD. 'If your father dies on Christmas Day and still hasn't taken out the distribution, you may not even find out that you own the account until it's already too late to take out that year's distribution,' she says. If the deceased was not yet required to take distributions, then there is no year-of-death required distribution. An inherited IRA may be taxable, depending on the type. If you inherit a Roth IRA, you're free of taxes. But with a traditional IRA, any amount you withdraw is subject to ordinary income taxes. For estates subject to the estate tax, inheritors of an IRA will get an income-tax deduction for the estate taxes paid on the account. The taxable income earned (but not received by the deceased) is called 'income in respect of a decedent.' 'When you take a distribution from an IRA, it's taxable income,' says Choate. 'But because that person's estate had to pay a federal estate tax, you get an income-tax deduction for the estate taxes that were paid on the IRA. You might have $1 million of income with a $350,000 deduction to offset against that.' 'It's not necessary that you were the person who paid the taxes; just that someone did,' she says. For 2025, estates worth more than $13.99 million are subject to the estate tax, up from $13.61 million in 2024. An ambiguous, incomplete or missing designated beneficiary form can sink an estate plan. Many people assume they filled out the form correctly at one point. 'You ask who their beneficiary is, and they think they know. But the form hasn't been completed, or it's not on record with the custodian. That creates a lot of problems,' says Tully. If there is no designated beneficiary form and the account goes to the estate and RMDs have not begun, the beneficiary will be forced to withdraw the money from the account over a five-year period. The simplicity of the form can be misleading. Just a few pieces of information can direct large sums of money. 'One form like that can control millions of dollars, whereas a trust could be 50 pages,' says M.D. Anderson, founder of and president of Arizona-based Financial Strategies, which specializes in inherited IRA issues. 'People procrastinate, they don't update forms and cause all kinds of legal entanglement.' It is possible to list a trust as a primary beneficiary of an IRA. It is also possible that this will go horribly wrong. Done incorrectly, a trust can unwittingly limit the options of beneficiaries. Tully says that if the provisions of the trust are not carefully drafted, some custodians won't be able to see through the trust to determine the qualified beneficiaries, in which case the IRA's accelerated distribution rules would come into play. The trust needs to be drafted by a lawyer 'who's experienced with the rules for leaving IRAs to trusts,' says Choate. Without highly specialized advice, the snarls can be difficult to untangle. One of the less obvious benefits of the Roth IRA is how it eliminates some tax issues in estate planning. Given the complexity of inherited IRAs, it's valuable when anything simplifies the process. In general, the Roth IRA allows you to pass assets tax-free to heirs, meaning that later they won't be taxed on the principal. However, the Roth IRA doesn't eliminate all tax issues. For example, if a spouse inherits a Roth IRA and decides to treat it as their own, any withdrawn earnings from the account will be taxable until the spouse reaches age 59 ½ and the five-year holding period has been met. Or if you take a lump-sum distribution of the Roth IRA, you'll also enjoy a tax-free withdrawal as long as the five-year holding period on the account was met. If this rule was not met, any withdrawn earnings are taxable. Of course, there are other ways to treat the Roth IRA that have different implications, and you'll want to explore which one works best for your situation. But the fact that the Roth IRA reduces the tax impact on heirs may make it easier to use that account. Inherited IRAs are complicated to say the least, and one wrong move can lead to long-lasting financial repercussions. But you have several resources, including some free ones, that can get you going in the right direction so that you can avoid costly mistakes. Start with the IRS website: It has detailed rules on inherited IRA distributions, RMDs and timelines. It's a solid reference, but don't expect personalized advice. Talk to your IRA custodian: Your custodian knows the specifics of your plan and can explain your options. But be warned: Some custodians are more versed than others in the complex rules surrounding inherited IRAs. If your custodian messes up, fixing it may require a private letter ruling — which means a $6,000 to $10,000 IRS fee and a six-month wait. Hire a professional: Look for an estate attorney or financial advisor who specializes in inherited IRAs. Choose a fee-only fiduciary — they're legally required to act in your best interest. If you're getting conflicting advice or something seems wrong, don't sign anything. It could lead to something irreversible. Get a second opinion from someone with expertise specific to inherited IRAs. It really can be that complicated. Learn more: Find a financial advisor near you or online An inherited IRA can be a windfall, especially if you're able to take advantage of decades of tax-advantaged compound growth. But as you're navigating the process, you'll need to avoid the pitfalls, which unfortunately seem all too easy to fall into. While relatively easy questions can likely be answered online, it could be well worth the cost to hire an advisor to help you avoid tax penalties and make sure it's the best option for you.
Miami Herald
4 hours ago
- Miami Herald
Tony Robbins sends strong message to Americans on 401(k)s
Many Americans preparing for retirement through savings and investments often encounter significant financial hurdles as they work toward a secure and enjoyable future. They eventually come to realize that while Social Security provides a foundational stream of income, it was never designed to fully support every cost of living throughout the entirety of retirement. According to renowned motivational speaker and author Tony Robbins, although 401(k) plans offer valuable opportunities, workers frequently encounter scenarios that could jeopardize their long-term financial well-being. Don't miss the move: Subscribe to TheStreet's free daily newsletter Regularly contributing to retirement accounts that offer tax advantages - such as 401(k) plans and Individual Retirement Accounts (IRAs) - is a smart financial strategy. Taking full advantage of these contributions, particularly with regard to 401(k) plans when an employer match is available, can greatly enhance retirement savings over the long term. Robbins has emphasized the importance of financial awareness when it comes to retirement planning. One of his key messages is a warning to American workers regarding misconceptions about Social Security and 401(k) plans. Related: Jean Chatzky sends strong message to Americans on Social Security A crucial part of effective retirement planning certainly involves understanding how Social Security benefits are determined and carefully choosing when to begin claiming them. By postponing benefits beyond one's full retirement age, retirees can receive higher monthly payouts from the program. Considering this background, Robbins highlights a critical caution about how 401(k) plans are used - urging workers to avoid common pitfalls that could affect their financial futures. Tony Robbins points out that for three decades, companies managing 401(k) plans were not required to reveal how much they were charging in fees. Now that disclosure is mandatory, he believes many providers hide those costs in lengthy, complex documents - making it hard for individuals to truly grasp what they're paying and keeping them largely uninformed. "What the majority of Americans don't realize is that an increase in 1% in fees will cost you 10 years in retirement income," Robbins wrote. More on retirement: Dave Ramsey offers urgent thoughts about MedicareJean Chatzky shares major statement on Social SecurityTony Robbins has blunt words on IRAs,401(k)s Robbins uses a straightforward hypothetical scenario to underscore the long-term impact of investment fees on retirement savings. In his example, three employees - let's call them Employee 1, Employee 2, and Employee 3 - each invest $100,000 at age 35 into separate mutual funds. All three investments generate the same steady annual return of 8%, and none of them withdraw any funds for 30 years. However, each employee is subject to a different annual fee: 1%, 2%, and 3%, respectively. By the time they reach age 65, Robbins clarifies, the variation in fees has created a striking difference in their account balances. Despite identical contributions and returns, Employee 1, who paid the lowest fee, has nearly double the retirement savings of Employee 3, who paid the highest. Related: Dave Ramsey sends strong message to Americans on Medicare Robbins emphasizes that the cost of high investment fees doesn't end at retirement. Using the scenario of each employee needing $60,000 annually to fund their retirement, he notes that the long-term consequences become even clearer. The employee facing the highest fees - Employee 3 - depletes their savings before reaching 75, while Employee 1, who paid the lowest fees, sees their nest egg last until age 95. According to Robbins, this stark contrast demonstrates how even small differences in fees can compound into significant financial disparities. It's a powerful reminder, he says, that being mindful of investment costs isn't just a matter of saving money - it's a crucial step in safeguarding long-term financial security. "I learned about these abuses while writing 'Money: Master the Game,' and it made me so angry that people were getting robbed blind," Robbins wrote. "So I brought in America's Best 401(k)." America's Best 401(k) is a retirement plan provider that says it aims to reduce the high fees commonly associated with traditional 401(k) plans. Robbins asked the firm to asses the 401(k) plan used by his own research company and ended up using their proposed solution. "They showed me that we were paying 276% more than we needed to for the same exact stocks," Robbins wrote. "It saved my employees $5 million in their retirement, and it cost nothing." Related: Shark Tank's Kevin O'Leary warns Americans on 401(k)s The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
