What’s the Deal with Unclaimed Tax Refunds?

Each year, billions of dollars go unclaimed as unfiled income tax returns. The IRS reported $1.4 billion in unclaimed refunds for 2015 alone. While that might seem like an unrealistic number, all that money came from an estimated 1.2 million taxpayers who failed to file their tax returns. Unfortunately, the IRS keeps the unclaimed refunds after three years, but if you were one of the millions of taxpayers not to file a tax return in 2018, it’s not too late to claim your tax refund in 2020.  

What is an unclaimed tax refund?

An unclaimed tax refund happens when someone fails to file a federal income tax return. It can happen for many reasons. Sometimes an unfiled tax return is caused by a death or illness of the taxpayer, or through a lack of understanding or experience with the tax return process. Part-time workers might think that they are not eligible for a tax return because they earned below a certain threshold. While that might be the case, it’s better to double-check with the IRS whether or not a tax return is required for the year. If you are unsure, you can use the Minimum Income Requirements to determine if you need to file a tax return this year. 


Unclaimed refunds can also come in the form of mailed checks that may not reach the intended taxpayer. Most of these errors are caused by typos on the filed tax return or a change of address since the return was received. Incorrect bank information on the filed tax return can also cause canceled direct deposits. In either of these cases, you can call the IRS to have your address or bank information updated.

How can you get your unclaimed tax refund? 

The IRS allows up to three years to file a return on any unclaimed tax refunds. But since it’s not the responsibility of the IRS to find your unclaimed tax refund, you will have to file your tax return to claim it. First, you need to locate all of your necessary documents for the year in question. That could include W-2s, 1099s,1098s, receipts, or bank statements. If you have lost any critical forms, you can request copies from the IRS using a 4506-T form. Waiting for the forms might take extra time, but it’s better than trying to file your tax return with incomplete or incorrect information.

No matter how you are preparing your taxes, either on a mail-in form or electronically, you will have to find the correct tax return form for the year you need to file. If you are using a software program to prepare your taxes, you can typically find the correct forms online. However, if you want to file taxes traditionally, you will have to use a 1040 Form for the given year. From there, you can fill out your tax return as you normally would. If you prepared your taxes electronically, you will have to print them out and mail them to the IRS, since they only accept late returns in paper form. If you don’t want to mail your tax return, you can hand-deliver them to your nearest IRS office

Since you are filing back taxes for a year you missed, you could face a penalty and interest for the taxes you owed. If you did submit your taxes previously but didn’t pay any taxes owed, you will still have to pay fees and interest. Your fee could be as high as .25% of your tax bill for every month it was late. If you filed your return before the due date that year, the percentage could be less. On the other hand, if you didn’t owe any more taxes to the IRS and will be getting a refund, you will have no penalties or interest to pay. 

How long does it take to receive your unclaimed tax refund? 

If you opted to get your refund check mailed to you, it could take up to 2 months. If you are in a hurry to get your unclaimed tax refund, consider having it directly deposited into a checking account without fees. Not only will this speed up the payment process of your tax refund by a few weeks, but you won’t have to deal with maintenance or overdraft fees when you go to spend your refund. Plus, you don’t have to worry about a refund check getting lost in the mail or delivered to the wrong address. 

Even though filing back taxes means extra work at tax time, it can mean a big refund check. By failing to file a tax return each year, you risk harsh penalties, compounding interest, audits, and even prosecution. The simplest way to avoid trouble with the IRS is to submit your tax return on time. It will save you a lot of time, money, and stress in the years to come.

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Accounts Receivable Tip: Diversify to Get Paid

Are repeated email reminders not getting your “please pay me” message through? How about 30, 60 and 90-day invoices, or repeated weekly phone calls?

In our experience, sending one type of message again and again won’t get great results. Why not? Because:

It’s easier to miss. What if your customer rarely checks email? Or hates talking on the phone? Or has a sleepy assistant managing their paper mail? We had one CloudBooks user tell us that his customers sometimes have thousands of suppliers to pay – an email reminder just doesn’t cut through the noise.

It makes excuses easier. Customers have a ready way to explain away non-payment: “Gee, I never got that invoice.”

It may not be LOUD enough. The best collections and AR people know that “the squeaky wheel gets the grease.” The trick to getting paid is making sure your invoice rises to the top of your customer’s accounts payable stack.

That’s why CloudBooks offers a full range of follow-up tools to help you get paid. Sure, other companies may focus on just one tool, like email reminders. That does make follow-up easier for you, but it doesn’t address the essential other half of the equation: making sure you actually get paid.

This brings us to the 2012 Document Management study from the Institute of Financial Operations. The study shows exactly why using many approaches is the key to success in accounts receivable. The IFO talked to accounts payable and receivable personnel in the corporate, government and nonprofit realms, asking them specifically about print invoices.

A few gems from the study:

  • 83% of respondents admitted to losing between one and 225 invoices a month
  • 2% said their workplaces lose between 226 and 350 invoices a month
  • Only 15% said they never lose invoices

This tells us a few things: First, digital payments may be rising, but a lot of businesses still prefer to get printed paper bills. This is why we’re huge fans of printed invoices here at CloudBooks. We physically send them out on our customers’ behalf, and they’re a central piece of our business. Second, there are a whole lot of misplaced invoices out there—and one (or more) of them may be yours.

Our recommendation? Add new follow-up methods to your accounts receivable mix. If you normally send print invoices, send an email or pick up the phone now and again. A friendly discussion may be exactly what’s needed to make sure your invoice is the next one paid.

And if we may humbly suggest it: try CloudBooks. That’s why we’re here: to help you use every possible tool to get paid.

How to improve your company’s AR process

Have you ever looked at your aging report with high hopes that your over-60-days and over-90-days columns would just zero out this once? I have, again and again, and I’m pretty sure I am not the only one!

What’s happening with these clients? In this blog post, we’ll talk about the most common reasons these balances persist and how you can get them to approach zero the next time you look at your report.

Billing Surprise!

The first reason is all about communication. Customers often suspend payments when a bill doesn’t jive with their expectations. A surprise is fun on birthdays and holidays, but never at billing time. If the amount that’s billed is higher than what the customer was expecting, then that can delay or jeopardize your payment.

If you’re new to the accounts receivable role, or are part of a newer business where invoicing is part of getting paid, billing with confidence and consistency is somewhat of a learned skill. Stay in communication with the client throughout your service period—especially if the bill or the project scope begins creeping up. Use a change order to gain the client’s approval for new costs that were not agreed upon in your original contract.

I had a client in Asia that wanted additional work done that was originally in the project scope but was cut due to budget concerns. I was already onsite, halfway around the world, when this came up. It would have been easy to just do it, but I held my ground, presented a change order, and it was not approved. This provided me with the ammunition I needed to say no to the extra work and avoided all sorts of issues with billing.

Invoice Lost

Playing lost on a TV show makes for great drama, but having your bill lost is not the type of drama you want in your business. Often with billing systems that send invoices via email, invoices become innocent victims of your customer’s SPAM filters. In other cases, a billing address or contact might have changed and caused a billing disconnect.

A helpful invoicing practice can be to request confirmation that it has been received by the person at your customer’s office—i.e. the accounts payable contact, finance manager or another person responsible for payments. If that’s not possible or not appropriate for your business, the next best thing is to follow up about a week before each of your invoices become due to ensure there are no barriers to an on-time payment.

Can’t Pay or No Intent To Pay

In some cases, vendors can’t or won’t pay.

An effective credit process early on can help root out these vendors before you do business with them. If the amount of the bill is significant to you or your business, run a credit check before you do the work.

For commercial companies, check out Dun & Bradstreet, and for individual credit reports, you can go to Experian, Equifax, and TransUnion.

If no report is available, it is common to request three trade references and a banking contact that can verify basic details about the customer before you start doing the work. In some cases, the best risk mitigation tool is to request that your customer pay 50 percent upfront.

And be careful. I’ve had clients tell me stories that a new client’s deposit check bounced after the work was done. The solution to that is to make the client wait as long as the bank makes you wait.

Simply Forgetful

Perhaps your client has a lot going on. Small business owners are often in their forties and fifties, a time in life with a great deal of responsibility—children, aging parents, and their own business to manage. It doesn’t take much to overwhelm these people. A friendly reminder might be all that’s necessary to get your bill back on their radar screens.

Disapproval or Disagreement Regarding Deliverables

You strive to do a fantastic job for each client, but what happens when a client disapproves of the work you did for them? This, and other scenarios involving a disagreement about deliverables, can be a common reason for a payment’s delay and can represent an uncomfortable situation for both you and the client.

Most of us dislike confrontation, and we procrastinate rather than taking the first step in the confrontation. Once you’ve discovered that the bill is late because the client is dissatisfied, you can make it easier on the client by inviting them to share their concerns— and then listening as objectively as you can. This will begin the dialog that needs to take place for compromise or settlement.

Make it common practice in your business to request feedback throughout each project (and especially at completion) to ensure your customers are happy with your work.

Approaching Zero

Making big gains in your accounts receivable balances won’t happen overnight. Commit this month to identify a few key areas of weakness in your processes—and then take action. A few small steps each month might allow you to look up a year from now with a whole new outlook on your business.

Have other ideas that have helped you make improvements to your company’s AR process? Please share them!