PRACTICAL MONEY SKILLS: Don't forfeit past tax refunds

Published: Friday, March 7, 2014 at 05:19 PM.

Another good reason to consider going back and filing a previous year's tax return: the Earned Income Tax Credit (EITC). Chances are, if the reason you didn't file a return was because you didn't earn enough to owe taxes, you may have been eligible for the EITC, a "refundable" tax credit for low- to moderate income working taxpayers. ("Refundable" means that if you owe less in tax than your eligible credit, you not only pay no tax but also get a refund for the difference.)

As an example, for tax year 2010, a married couple filing jointly with three or more qualifying children whose adjusted gross income was less than $48,263 were eligible for an EITC of up to $5,666. To find out how EITC works and whether you qualify, consult IRS.gov.

For the rest of us, April 15 looms as the deadline for filing our 2013 taxes. At the very least you should request a filing extension by then; otherwise the penalty on any taxes you owe increases dramatically.

Typically you'll have to pay an additional 5 percent of taxes owed for each full or partial month you're late, plus interest, up to a maximum penalty of 25 percent. However, if you file your return or request an extension on time, the penalty drops tenfold to 0.5 percent per month, plus interest.

Bottom line: If you skipped filing a tax return in the last three years, go back and crunch the numbers – you may be pleasantly surprised by a hefty refund.

Jason Alderman directs Visa's financial education programs. To participate in a free, online Financial Literacy and Education Summit on April 2, 2014, go to www.practicalmoneyskills.com/summit2014.



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