The IRS has kept $4.75 billion in overpayments from taxpayers who can no longer legally claim them back, according to an audit from the Treasury Inspector General for Tax Administration.
When a taxpayer sends a payment to the IRS, and the IRS is unable to determine which taxpayer’s account the payment is for, the money is applied to the unidentified remittance file. This usually happens when a taxpayer submits a payment to the IRS but does not file a tax return.
A rule within the IRS, known as the refund statute, puts a deadline on how long taxpayers can claim a refund on their overpayment of taxes. If the taxpayer doesn’t turn in a tax return to the IRS within that deadline, the payment is moved to the excess collection file.
Currently, the excess collection file holds $5.81 billion, a figure that has increased by 23 percent since January 2010. Eighty-two percent of that money, or $4.75 billion, consists of overpayments that can no longer be claimed by the taxpayer, because of deadline restrictions. The rest could be returned to taxpayers.