Are your clients about to miss out on $1.2B in tax refunds as deadline approaches?

More than 1.3 million taxpayers nationwide still have unclaimed refunds tied to the 2022 tax year and face an April 15 deadline to submit their returns, according to the Internal Revenue Service.

The agency estimates roughly $1.2 billion in refunds remains outstanding for individuals who have yet to file their 2022 Form 1040 federal income tax return. The median potential refund is $686, meaning half of eligible taxpayers could receive more than that amount. The estimate does not include additional credits that may apply.

Federal law generally provides taxpayers a three-year window to file a return and collect any refund owed. After that period expires, unclaimed funds become the property of the US Treasury.

Many low- and moderate-income workers could still qualify for the Earned Income Tax Credit for 2022, which was worth as much as $6,935 for taxpayers with qualifying children. Eligibility thresholds for that year included incomes of up to $53,057 — or $59,187 for married couples filing jointly — for households with three or more qualifying children. Limits were lower for families with fewer or no qualifying children.

The IRS also cautioned that refunds may be held if taxpayers have not filed returns for 2023 and 2024. Any 2022 refund could also be applied toward outstanding balances owed to the IRS or state tax agencies, as well as past-due federal obligations such as unpaid child support or certain student loan debts.

Taxpayers seeking to file late returns still have several options to obtain necessary documents. Missing Forms W-2, 1098, 1099 or 5498 can be requested from employers, financial institutions or other payers. Alternatively, individuals can access a free wage and income transcript through the IRS’s Get Transcript Online tool.

Another route is submitting Form 4506-T to request a transcript showing data from information returns received by the IRS, though written requests can take several weeks to process — potentially cutting into the time remaining before the filing deadline.

State-level estimates highlight the scale of unclaimed refunds. California leads with about 143,200 potentially eligible taxpayers and roughly $124.7mn in possible refunds, followed by Texas with an estimated 126,000 individuals and $111.7mn. Florida and New York also rank among the states with the largest amounts outstanding.

With the deadline approaching, advisors may want to remind clients that failing to act could mean permanently forfeiting funds that could otherwise support savings strategies, debt repayment or investment allocations.