“Does the IRS Have Money Waiting for You?”   Leave a comment

The IRS published Summertime Tax Tip 2011-13: “Does the IRS Have Money Waiting for You?” The IRS gives instructions to taxpayers who could have claimed the Earned Income Tax Credit but didn’t, or who didn’t receive their tax refund checks in the mail

“The IRS sent an email notice this year during the tax filing season that every year, tens of thousands of individuals are eligible for the Earned Income Tax Credit but fail to claim it on their tax return. Let’s leave to the side the question of whether the Earned Income Tax Credit is good policy. Given that it exists to help poor people, it is a significant positive achievement if we in the professional community can make people aware of the legitimate tax benefits to which they are entitled. Whether we give poor people our own money by charity, or enable them to take legitimate benefits to which they are entitled, the result is the same: more money for them to meet their living expenses. Similarly, the IRS sends out messages every year that many thousands of individuals fail to deposit their tax refund checks.  The IRS promotes direct deposit of tax refunds into bank accounts to minimize the extent of this problem. Whether one is claiming a tax refund or depositing an existing refund check, the deadline for the 2008 tax year is April 15, 2012, three years after the original filing deadline.” – said Paralegal, Yechiel Robinson (M. Robinson and Co., P.C. 2011).

The question of missing money is almost always outside the scope of what M. Robinson & Company, P.C. does for its clients. The closest analogy in our practice area is the filing of an amended tax return (Form 1040X) as a “protective claim for refund” to protect the client’s ability to take a refund if the client’s tax position is sustained. For example, there may be a question of whether a taxpayer is allowed to record a business loss as tax-deductible, and if so, which year to assign that loss. This is a special case of refund money that a client might be entitled to take, but it is impossible to know unless we formally request that refund on a Form 1040X for the federal income tax, or Form CA-6 from the Massachusetts Department of Revenue.

As always, the foregoing should be regarded as general conceptual information, and anyone who wants to explore the possibility of deducting a business loss from their income should consult a tax professional.

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